The majority of us will take on a mortgage with the intention to pay it off, bit by bit. However, as we all know, life can throw surprises at you, and over time your circumstances can change and you can sometimes find yourself in financial difficulty - all of which could result in struggling to pay your mortgage. If you’re currently worried about your repayments, reading this guide should hopefully help get you back on the straight and narrow, or at least point you in the right direction.
Speak to your mortgage lender
As soon as you realise you’re struggling, or are going to struggle to keep up with your monthly repayments, the first thing to do is speak to your mortgage lender. They will be able to come up with a new plan for how you can better manage your payments, whether that’s extending the mortgage term or changing how often you make payments.
It’s important you know that your lender is working with you, not against you. It’s in your lenders best interest to keep the roof over your head, and they have to show that they’ve made every possible attempt to help you, so don’t hesitate to contact them.
What if you’ve already missed a payment?
If you’ve already missed one or more of your mortgage payments, this will be reported as a late payment (also known as a delinquency) and you will be classed as ‘in mortgage arrears’. The late payment will remain on your record for several years and will negatively affect your credit score going forward.
Do you have insurance cover?
If you already have Mortgage Protection Payment Insurance (MPPI), now is the time to use it. This will pay your repayments off in full in the event that you are made redundant, have an accident that prevents you from working, or long-term sickness. However, MPPI might not be the right option for you, so it’s worth looking at your circumstances first before making a decision. For instance, do you get a good redundancy package at your workplace? Is your sick pay generous?
There are lots of different types of insurance, so if you’re reading this thinking you don’t have MPPI but you know you have something very similar, it may be that you have a policy that covers illness but not unemployment. If you’re unsure which cover you have, you can always check with your lender or mortgage adviser.
Can the Government help?
Depending on your personal circumstances, you might be able to get help from the government towards your repayments. They won’t ever be able to pay off the full amount, but there is something called Support for Mortgage Interest (SMI) where the government can pay off the interest on the repayments, but you’ll still have to find the rest.
You can use the GOV.UK benefits calculator to see if you’re eligible. It’s worth checking what other benefits you might be able to apply for - after all, every penny is going to help you pay your mortgage
Remortgaging to a better deal
Some people prefer to see if they can remortgage to save money or switch to an interest-only mortgage that SMI would cover. However, this depends on the current mortgage deal you have and whether switching is an option for you. The good news is that a mortgage adviser will be able to run through all of this with you.
If you aren’t able to remortgage and you know your financial situation won’t improve in the long term, you could consider selling your house and buying a cheaper one, or moving into rented accommodation.
Budget planning
Taking a closer look at your finances and spending habits can help you better manage your money.
Look at how much money you have coming in a month and make a list of all the outgoings you can possibly think of. Obviously, bills are bills and will always need to be paid, but hopefully, this will highlight any flexible outgoings you have and areas where you could potentially cut back on (for instance, socialising, too many subscriptions, or dining out). Using a budget planner can certainly help get you started with this.
Top tips to avoid getting into arrears
1. Additional debts to pay off the mortgage - Taking on more debt in order to pay off debt is not something we ever recommend you do. It isn’t beneficial to you in the long run, plus these types of loans can be very expensive and are often secured against your home.
2. Selling your house with a plan - Do not sell your house if you don’t already have a backup plan of somewhere else to live.
3. Giving your keys back - The house is still technically yours, and therefore you will still be responsible for making the repayments before the house is sold. Plus, if there is still an outstanding balance once the house is sold, you’ll be accountable for that too.
With this in mind, the first step we recommend is to get in touch with your lender, or you could get in touch with a debt counselling service to help advise you on your situation.
Important information
Your home may be repossessed if you do not keep up repayments on your mortgage.
There may be a fee for mortgage advice. The actual amount you pay will depend on your circumstances. The fee is up to 1% but a typical fee is 0.3% of the amount borrowed.
You may have to pay an early repayment charge to your existing lender if you remortgage.