How To Deal With Mortgage Arrears
What If I Do Not Pay, Or Am Unable To Pay My Mortgage Arrears?
Mortgage lenders are shrewd business operators and will expect you to pay off any arrears as quickly as possible. Whilst they are likely to allow you some flexibility to deal with your mortgage arrears, if they do not perceive that you are making any serious attempts to address your financial circumstances and pay back your mortgage debt then they will seek possession of your property through the Courts, which can ultimately lead to you being evicted from your home. At this stage the mortgage lender will sell your property, usually via a public auction, and will use the money raised from the sale to pay off your mortgage debt, leaving you without any remaining capital after the sale has taken place and legal fees have been paid. If there are insufficient funds to pay off your mortgage after your home has been sold, a term referred to as negative equity, then you will continue to be liable to pay any outstanding mortgage arrears or debt to the mortgage lender.
Hot Tips:
1. Try To Sell Your Property Yourself
If there is no other option available to you then you should try to sell your property before the mortgage lender makes an attempt to repossess it. This is because repossessed properties often attract lower values at house auctions, due to the nature of their circumstances. If you can secure a private sale, then you are likely to be in a stronger financial position.
2. Avoid Rent Back Schemes
There are many schemes that advertise the ability to sell your property to an organisation, which will then allow you to rent it back from the company. These are very tempting especially as there is the prospect of remaining in your property. However you should be very cautious about such schemes as you may be expected to pay increasingly high rents to remain in the property and still end up being evicted. In effect you are writing a blank cheque to any such organisation, who play on the fact that you would prefer to remain in your own property even when renting costs soar. You should always do some independent research or ask friends of family who have used these schemes before choosing this route. Remember that these organisations will want to recoup their investment and are likely to charge you a premium to remain in your own home.
3. Eviction Orders
If you have tried unsuccessfully to sell your property yourself or you are unable to come to an agreement with your mortgage lender about suitable repayments, then there may be little choice but eviction. If you are facing this situation you should not attempt to leave your property voluntarily, but should wait for a Court imposed eviction order. If you leave of your own accord then you will be classed by your local authority as having made yourself “intentionally homeless” and will find it almost impossible to register for a council or housing association property.
There are a range of reasons that people may get into mortgage arrears through loss of employment, health difficulties or as a result of a relationship breakdown. If you sincerely believe that your financial difficulties are only a short term issue then you should speak with your mortgage lender at the earliest opportunity. Each mortgage lender is likely to have a different approach to dealing with individuals in mortgage arrears but if you can show them that you are serious about making repayments and provide a well argued case then lenders are more likely to be responsive to your circumstances. Here are our top tips for convincing your mortgage lender;
1. Work Out What You Can Afford To pay
Before you do anything else, you need to sit down and calculate how much money is coming in and how much you are spending each month. Try to identify areas where you may be able to cut back on spending and then create a household budget by writing this information down. There is an excellent free budget template available to download Here
2. Make An Offer
Sometimes it can be emotionally difficult to have a telephone conversation about a topic such as mortgage arrears. Instead consider writing a letter to your mortgage lender explaining your financial circumstances and making an offer of what you can realistically afford to pay. The key word is to be realistic. Mortgage lenders will normally prefer to work with customers to resolve problems, if the information provided is accurate. Include as much detail as possible about your budget and your income and expenditure and how you arrived at your offer. Sometimes writing a letter enables you to clearly explain your position and what you intend to do to resolve the problem without getting upset and forgetting important information.
3. Follow Up
It is important to call your mortgage lender within 5 working days to ensure that they have received your letter and to discuss your mortgage arrears and whether they are willing to accept your alternative offer. Explain that your solution benefits both parties and avoids costly eviction proceedings for the mortgage lender.
4. Make Repayments
It is essential that once you have agreed new repayments with your mortgage lender that you stick to them. Failing to do so is likely to bring the possibility of eviction closer, so prioritise these payments above other household bills. If your mortgage lender declines your offer then you should consider making small but regular repayments, as this may make it more difficult for a mortgage lender to push through an eviction order at a Court, if there is evidence of you having continued to make attempts to pay off your mortgage despite your financial hardship. If at any point in the process you feel that you are being treated unfairly by the mortgage lender then you should first attempt to resolve the situation through their internal complaints procedures, which are usually available on their website or in your local branch. Should you fail to receive a satisfactory answer then try contacting the Financial Ombudsman Service who regulate the lending and finance sector. For more information about this service, visit www.financial-ombudsman.org.uk.
Boosting Your Income
There is only so much that you can cut back upon when trying to make savings to pay off your mortgage arrears and there comes a point when earning a little extra income is a much more viable option. On this site you will find numerous free ways to earn a little extra income and whilst it will not make you rich, it may be the difference between repossession or remaining in your home. Here are a few ideas;
1. Complete Paid Surveys - You can earn up to £10 per hour for participating in surveys and testing products in the comfort of your own home.
2. Get Paid To Write - If you enjoy writing you might be able to put your skills to use, writing articles, poems or short stories and earning a small income in return.
3. Blogging - There are a number of everyday individuals who have decided to blog their way out of debt. They post a day by day account of their attempts to deal with their own personal debt problems and then they sell advertising space on their blog. There are a number of such inspiring blogs which were set up by ordinary everyday people, here are a few;
4. Rent Out A Room - You may have a spare room in your property which could be rented out to a suitable individual to contribute towards paying off your mortgage arrears. Ask around your friends and family.
5. Domestic Violence and Rent Arrears - Each area in the UK has a Police Unit dedicated to investigating domestic violence perpetrated by males against their partner’s. Some women end up getting into mortgage arrears after their abusive partner moves out, and stops paying the mortgage. Some males will also use this threat of repossession as a way of getting their partner to allow them to move back in. However some Police Domestic Violence units have access to a fund which will actually pay or contribute towards mortgage repayments for a specific period of time after the ending of an abusive relationship. It can vary from area to area but if you are struggling with mortgage arrears due to domestic violence you should speak to your local Police team and ask about the possibility of receiving these payments.
6. Insurance Policies - You should also consider any Income Protection or Mortgage Protection Insurance Polices that you took out as insurance against being unable to pay your mortgage. These will normally pay out in the event of loss of employment but it is worth checking the fine print.
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