During an economic downturn, a mortgage can stretch a borrower to the limit. If you are having problems paying your mortgage then you should take action as a matter of priority. Do not assume that all will be well if you do nothing. Failing to make mortgage payments on time could lead to the loss of your home. In all cases it makes sense to seek legal advice at an early stage.
If you are facing difficulties with your mortgage or payment of loans secured on your home, the following advice may help.
As soon as you even foresee problems with paying your mortgage, you should take advice and, normally, contact your lender. You can never do this too early but it is possible to leave it too late. UK mortgage lenders are regulated and are required to treat you fairly and to help you to prepare a plan which is practical in your circumstances. The following websites may also be of assistance:
• The Citizens Advice Bureau (CAB).
If at all possible, be ready to present a plan by which arrears in the loan will be repaid and the account brought back within terms within a reasonable period.
Can the Lender Help?
Ask your lender if they have any special rescue schemes for customers in difficulty or if they are prepared to change your mortgage terms to make it more manageable. Your lender might consider adding your arrears to the debt or extending the term of the loan to reduce the payments. It might even reduce the interest rate in some cases.
Pay as much as you can and offer to make payments towards the arrears over a period of time. Keep them informed if it looks as though you won’t be able to keep your promises.
Can You Increase Your Income?
Once problems arise, whether through redundancy, illness or just an inability to pay the new rates which start at the end of the fixed rate period of your loan, do what you can to increase your income. Apply for any available benefits, seeking advice from the CAB if you can't work out your entitlement for yourself.
If you took out a Mortgage Payment Protection Policy when the loan started, make full use of the benefits available under it.
Over the last few years, many households have not seen the need to economise. Some careful thought may show several areas of ‘excess’ spending, especially where travel, telephone and entertainment services are concerned.
Can You Raise Other Capital?
Do you have something valuable or any investments you can realise? If so, take advice regarding the wisdom of using them to reduce your arrears. Car boot sales and online auction websites can also raise surprising amounts of money.
Should You Sell?
Finally, consider the practicality of selling your property. Will you really be better off elsewhere and will you raise enough to pay off the whole loan? If you have a shortfall because you are in negative equity, the lender can still pursue you for the balance owing.
Don’t Put it Off
What you should not do is ignore the problem and it is almost certainly not a good idea just to give your keys back to the lender. Remember, the lender cannot evict you without a court order. Judges are more lenient than lenders and will normally respect someone who makes every effort to keep up with their mortgage. The court can in many circumstances give you time to pay by reducing payments, extending the term of the loan and even reducing the interest rate. These are called ‘Time Orders’ and you should ask for one if you have to go to court.
If it comes to a court hearing, treat the paperwork and proceedings with respect and comply with all time limits.