Mortgage Arrears and Repossession Help

Remember the warning?

Are you concerned the payments on your mortgage may be a financial problem?

What you can do?

Many borrowers are not aware that the repayments on their mortgage may cause a “payment shock” resulting in financial planning difficulties.  Below are some simple points to help you understand how you may be affected. Knowing how to deal with your situation is often far more simple and less stressful than you may believe.

• Tell your lender as soon as possible if you are having problems repaying your mortgage or think that you may possibly experience problems shortly.
• Seek debt advice if you would like help with managing your finances.
• Contact your lender as soon as they try to contact you. Be responsive, they are there to help
• Make sure you keep any other party paying the mortgage up to date with any problems you may be experiencing, if you have a joint mortgage and may be separated for example, or anyone guaranteeing the mortgage (Guarantor/s).
• Keep to an agreed payment plan with your lender or tell them if there is a change in your circumstances that may affect the arrangement. If you do not make the agreed payments, they may have to go to court to get the money you owe them or to repossess your property using a ‘repossession order’.
• Check whether you can get any benefits or tax credits, which could help to increase your ability to make payments.
• If you have an insurance policy, (payment protection) PPI check to see if it can help with your payments.
• Always ensure your lender has your full and up to date contact details if they should change.

You may want to talk to a professional adviser, such as a debt counsellor or a lawyer, before you change your mortgage arrangements. It is strongly advised that you seek independent, free, debt advice. You may be able to agree a payment plan with your creditors (debts) to help you through a difficult financial time!

What will your lender do?

• Contact you as soon as possible to discuss your problem.
• Talk to an agency or company which gives you debt advice.
• Give you reasonable time to pay back your debt.
• Only start proceedings to repossess your home if they cannot solve the problem with you.

They may be able to:

Arrange a new payment plan with you, taking your and their interests into account.

• Change the way you make your payments, or the date on which you are currently paying them.
• Allow you to pay back your mortgage over a longer period of time (this may reduce your monthly payments).
• Change the type of mortgage you have.

If they cannot offer you any of these options, they should tell you why. If they are able to make one of these arrangements with you, they will explain how it would work and give you time to consider your options. If they are unable to offer any of these options, they might agree to you remaining in the property to sell the property yourself depending on your overall circumstances (LTV and income for example).

Costs and charges you may be liable for from your lender

If you are fall into arrears, they may charge you for reasonable administrative and legal costs. You will be told the amount you will have to pay. It is usually clear in your mortgage agreement with them.

If a lender cannot agree a solution:

• They may send a debt counsellor to see you to discuss your financial circumstances and the cost of the visit might be charged to your mortgage account.
• They may go to court to commence proceedings to repossess your home. If proceedings take place, you are strongly recommended to attend the court and that you seek independent debt advice.
• Starting court proceedings does not necessarily mean that the lender will repossess your home. All efforts should be made to solve the problem with you. Repossession is a last resort.
• Before a lender repossesses your home, they will give you advice about getting in touch with your local authority to see if they can help find you somewhere else to live.

If your home is repossessed:

• It will be sold for the best price they can reasonably get. It will be sold as soon as possible.
• They will give you reasonable time to take your possessions from your home.
• Your lender will use the money raised from selling your home to pay your mortgage and other loans or charges secured on it.
• If there is any money left over, it will be paid to you.

If selling your home does not enable you to have enough money to pay off the mortgage-Shortfall debt:

• If there is not enough money from the sale of your home to pay off the whole mortgage you will still owe the lender the amount that is left (a shortfall debt). They will tell you what this is as soon as possible.
• If you bought your home with other borrowers, (these will be on the mortgage documentation), each of you is responsible for all the money borrowed. This is the case even if you normally only pay part of the mortgage.
• The lender will contact you within six years of selling your property (five years in Scotland) to arrange for you to pay back what you still owe.
• Your income and outgoings will be taken into account when you make an arrangement or a payment plan for this shortfall debt. If they cannot arrange a suitable plan, they may go to court to get their money back. You might have to pay additional court and legal costs.
• If a shortfall debt is not paid, it may affect your credit rating with the Credit Rating Agencies (CRA).