We recognise that some households may be struggling to meet their housing costs due to the current cost of living crisis putting a squeeze on everyone’s household budgets.
Help is available to support you and we would encourage you not to wait until it is too late as early intervention can make a lot of difference.
If you are worried that you cannot meet your mortgage or home loan repayments, you are in arrears or concerned that you might fall behind with your repayments, please contact your mortgage lender as soon as possible.
Speaking to your mortgage lender
Your lender should treat you fairly and advise you what they can do to help you keep your home, with repossession as a last resort.
Your lender would prefer to decide to settle the debt, rather than repossess your property. You must, however, be proactive and engage with them to make an agreement to avoid repossession.
Options if you cannot pay your mortgage
In order to resolve any mortgage arrears you could:
- arrange a repayment holiday from your mortgage
- reduce your payments for a set period
- switch to an interest-only mortgage
- re-mortgage with a longer term and lower repayments
- use payment protection insurance (PPI) to cover your arrears
- think about debt solutions such as bankruptcy, IVA or a debt management plan
- sell the property
By law, the lenders must consider any reasonable suggestions you make to clear your debt before pursuing a repossession from the county courts. They must write an official warning of this legal action before they start it, and you will be able to negotiate a solution at this point too.
Keep a record of all the communications you have with your lender, as these will support your case if it does go to court. If you make an agreement, you need to make sure you can afford it as you will lose goodwill if you cannot pay later. Payments should be realistic and reliable so do not over offer but make a financial plan to work out what is affordable to you. We can help you to draft up a budget plan if you feel this would help, please contact us.
If you stop paying your mortgage and make no efforts to communicate with your lender, this will harm any case you make against your property being repossessed.
Our cost of living help pages have guidance if you are struggling financially.
Selling the property with mortgage arrears
The lender may agree to suspend your mortgage arrears so you can sell the property.
To qualify you must:
- show evidence of steps you’ve taken to sell the property at a realistic price
- share details of all offers you receive
- show proof that you’ve arranged for the property to be assessed, including an Energy Performance Certificate (EPC)
- arrange for your estate agent and conveyancer to contact your lender about the progress of the sale
Can my mortgage lender repossess my home?
If negotiations fail, the mortgage lenders can take you to court in a bid to repossess your home.
In court, you will be able to argue the case for one of the solutions above. If you can show evidence of trying to fix your debts and co-operate with your mortgage lender, this will strengthen your case.
A judge will then sanction one of the following outcomes:
- a repossession- this means you would be evicted from the property, allowing the lender to sell it to repay your mortgage debts
- a suspended possession order- this allows you to stay in your home, provided you meet certain conditions. If you broke the agreed conditions, your lender could apply to the courts to evict you
- an adjournment- a postponement of the case, allowing both parties to take certain steps before the case is reviewed at a later date
- a dismissal- this could occur if the lender doesn’t follow the correct procedure for bringing legal proceedings against you, or if you clear your arrears before the case is brought to court. There is nothing stopping the lender
The options available to manage your mortgage if you lose your job
The first step to to inform your mortgage lender of your change in circumstances as soon as possible. Together, you can compromise on the most suitable way to repay your debt.
Consider whether you have any payment protection insurance and whether this could help cover the payments whilst you find another job.
Under FCA regulations, your lender will have to consider any reasonable proposals for repaying your debt. Here are some ideas to help you through this rough financial patch.
Claim any benefits you’re entitled to
If you lose your job, you may be entitled to benefits, including Council Tax Reduction, Working Tax Credits, Jobseeker’s Allowance or Universal Credit.
If your income has dropped, you will probably be entitled to pay less tax and could even be eligible for a tax refund or Tax Credits. Claim these as soon as possible, as they could help ease your mortgage payment problems.
Prior to April 2018 Support for Mortgage Interest (SMI) was a benefit that did not need to be paid back but it has now become a loan which means that any SMI loan payments you receive must be repaid with interest, but not until you sell or transfer ownership of your home.
You may qualify for an SMI loan from the DWP if you and/or your partner:
- have a mortgage and/or loan secured on your property, or make alternative financial payments for the home that you live in; and
- receive the guarantee element of Pension Credit; or
- have been receiving Income Support, Jobseeker’s Allowance or Employment & Support Allowance continuously for 39 weeks (exceptions apply); or
- have been receiving Universal Credit for 9 consecutive months
For Universal Credit claimants to qualify for an SMI Loan, they must also have no earned income at all.
How much will my SMI Loan payments be?
SMI Loan payments can help towards the balance outstanding on the mortgage and/or other loans secured on your property (up to a limit).
For working aged people the limit is £200,000. Any mortgage or loan specifically used for adaptations to your property will not count towards the £200,000 if these adaptations are to meet the needs of a disabled person in the household. For pension age people the upper limit is usually £100,000 but there are exceptions.
A standard interest rate is then used to work out the amount you may get. This is currently 2.09% (it was 2.61% between April 2018 and April 2021). For example, if your mortgage balance is £100,000 the maximum SMI Loan payment you could receive would be £100,000 x 2.09% = £2,090 per year or £40.20 per week.
If you have any income coming in or another adult living with you who is not your partner (a non-dependant), this may then be taken into account to reduce the maximum SMI Loan payment you qualify for. The rules are complex, but the benefits calculator will work out how much SMI Loan you may qualify for and display this alongside your benefit entitlements.
Second Mortgages and Home Loans
Always think very carefully before taking out a second mortgage or secure loan to help you make ends meet or to bring in extra money. A secured loan uses your property as security in case you can’t make the repayments on the loan. You should review your budget to ensure that anything you commit you, you can afford and if the interest rates are variable, that you build in that they are likely to rise in the coming months and years to “cushion” yourself.
Contact us and we will do all we can to support and help you.
We can support you to negotiate with your lender and help you to draw up a budget plan to know what an affordable sum is to offer. We can help explain the process to you and refer you to other agencies if we identify you need additional support. The most important thing is to get help early, before things become unmanageable.