What Can You Do If You're Struggling To Make Your Mortgage Repayments?

There are plenty of reasons why even the most financially organised of people could find themselves in a position where it's a struggle to meet their monthly mortgage repayments.

If this happens to you, it's important that you know what to do and how to move forward.

Don't hesitate - speak to your lender

The golden rule if you're struggling to meet payments is to speak to your lender as soon as you possibly can. Don't bury your head in the sand and hope for the best as this is when you'll find yourself in a situation that is far more stressful and far more serious than it ever needed to be had you acted sooner.

If you know you're going to struggle to make a payment, speak to them in advance so that they are aware of your situation. A missed payment they're aware of and have agreed to is far better than missing a payment without telling them and a missed payment that they had no knowledge of could kickstart repossession proceedings. Note that a missed payment or late payment can stay on your credit file for up to 6 years.

Whether you're already in a position where you're going to miss a payment or know that you're not going to be able to continue making your repayments for much longer, you must discuss your concerns with your lender as soon as you're aware of a problem. It can seem daunting, but they will be willing to look into arranging an alternative payment plan with you. Your lender would prefer for you to continue paying off your mortgage over repossessing your home, so they will be willing to work towards this goal with you.

If you would prefer some advice before you speak to your lender, you can take advantage of free advice from independent debt charities, such as StepChange and the National Debtline. They can give you advice on how to talk to your lender about your situation and can help you to budget so that you might be in a better position to afford your mortgage repayments.

What options might be available?

Before you consider any of the following steps, you should sit down and draw up a budget to determine where your finances are going each month. You might find that you can cut out non-essentials or make changes so that you're paying less for certain things each month such as bills that will enable you to find the spare cash to make your repayments. Steps like these can save money and you might find that you can continue to make your monthly mortgage repayments without needing to change the details of your mortgage term with your lender. 

Extending your mortgage term

If you are speaking to your lender and looking at ways to make repaying your mortgage easier, one of the things that they might suggest is to extend your mortgage term. Lengthening the mortgage term, for example from 20 years to 25 years, will spread the debt over a longer period, thereby reducing the amount you owe each month to a more manageable sum. Note that 25 years isn't the limit, your mortgage term can run right up until your retirement age. You will ultimately pay more in interest over the years, however you could look to reduce your term again if your finances improve and you can afford to pay back more each month again. 

You could also ask for a payment holiday

Your lender will have to agree to this, however it might be worth asking if you just need a short break from making your mortgage payments in order to get back to the front again. It could affect your credit score, however if the alternative is to miss payments without the lender having agreed to this, then it will have the same effect anyway and you will have put your home at risk as well. 

You could ask to switch to an interest only mortgage

An interest only mortgage is where you only pay off the interest each month, but none of the capital. By not having to pay off any of the capital and just the interest, this could reduce the amount you owe each month to an amount that's much more affordable. If your financial situation changes again further down the line, you could always switch back so that you would be paying off both the capital and the interest again. 

What if the lender doesn't agree to any change?

It will ultimately depend on your situation. If you are in real trouble financially, it might be that even with help in place to make repayments more affordable, the reality of your situation may mean it would still be difficult for you to make the repayments. Unfortunately if your lender doesn't think you'll be able to keep up with the payments, they will move quite quickly towards repossessing your home. They can only start this process when you are at least three months into arrears and have referred you for independent debt advice. Once your home has been reposessed, it will be listed at auction where it will be sold quickly, however it might not sell for the best price as homes sold at auction usually sell for less money. Sadly if the sale doesn't cover what you still owe, they can chase you for the outstanding balance. 

What can you do next?

If nothing can be resolved with your lender but you would rather avoid the process of having your home repossessed, as a last resort you might want to think about selling your property on your own. This way you have control over the sale of your house and you can aim to get the best possible price for it rather than if it were to be repossessed and sold at auction. You can either look to buy a cheaper property where the repayments wouldn't be as high each month, look to rent somewhere that's more affordable or choose to move in with family or friends if this is an option until you can get back on your feet financially.

If you're struggling to make your mortgage repayments, you may not be able to afford the expenses that come with selling a property, such as estate agent fees. If not, then look to your lender for help. If you explain that you can no longer meet the monthly repayments and would like to sell your home, they might be able to help with an assisted voluntary sale scheme. These are designed specifically for people who are struggling financially. It will give you the time to sell your property and will help with the costs involved. Your lender might also be willing to accept reduced mortgage payments each month until you've sold the property. 

If you are able to finance the sale of your home yourself whether it's through what's left in a savings account or help from family, look for a reliable buyer who can complete quickly, so that you can cut ties and move on. For example first time buyers or those who have already sold their property and are renting are good bets if you're after a buyer who can move quickly through the process. Whilst it's understandable that in the face of financial hardship you'd want to get the most money out of your home, you don't want to risk sales falling through or being gazundered at the last minute and forced to accept a lower offer from your buyer.

Things that you should try to avoid doing

If you're struggling, there are a couple of things that despite the difficult circumstances you should try and avoid doing.

One of these is taking out additional loans to try and cover your debts. It's a vicious cycle and the interest on some of these loans can be expensive. You could find that your financial situation deterioriates further if you go down this route. 

Do not sell your property if you don't have anywhere to live in the aftermath. The local council could refuse to help you with any accommodation if they decide that you have made yourself voluntarily homeless. Make sure that you have friends and family who you can stay with, or that you have found somewhere affordable to rent if you do choose to sell your property.

Don't hand the keys back to the lender and surrender your property. It's always best to try and sell it yourself. Even if you've handed back the keys, you will still have to make the monthly mortgage repayments and pay all other associated costs on your property until it sells. This is because the property is still yours, and it's therefore your responsibility to continue making payments. It's likely that your home won't sell for as much at auction as it would on the open market, so your lender will chase you for the shortfall if this happens. As with the above point, if you don't have anywhere to live and hand your keys back, the council may choose to not help you.

Furthermore, once you've handed the keys back, you may not be allowed back into the property again, meaning you would need to empy it of all your belongings before giving up your keys.

Publish date: 24/08/2018

Publisher: New Home Finder

Url: https://www.newhomefinder.co.uk/new-home-info/finance-legal/what-can-you-do-if-you-re-struggling-to-make-your