Having Problems Paying Your Mortgage?
A mortgage is a loan you take out using your home as security. This means that if you do not make the payments or fail to comply with the terms and conditions of your mortgage, your home could be repossessed by your lender.
If you are struggling to pay your mortgage you must take action quickly to stop yourself from falling into debt.
The first step should be to talk to your mortgage company. It may be possible to negotiate a reduction in the monthly repayment amount, for example by agreeing a repayment holiday, switching to an interest only mortgage or extending the mortgage term.
Your first priority should be to meet your mortgage repayments, ahead of any payments to credit card debts. Credit card debt is not secured against your home. In some cases credit card debts can be reduced or frozen and this includes the interest if you can show that you have worked out a budget and cannot afford to make these payments.
If you cannot afford to pay the full mortgage repayment you should pay what you can afford.
You should also check whether you have a mortgage payment protection policy in place, if so, this may cover your mortgage repayments in the event of unemployment, accident or illness.
If the above steps do not help then you could consider the following options:
- Selling your home – if your income and outgoings cannot be improved and future mortgage arrears are inevitable, you should consider selling the property voluntarily to avoid repossession. If you are in negative equity (where the value of your home is less than the amount secured on it) the mortgage company will need to consent to the sale and agree with you how the shortfall will be repaid;
- Renting out the property (or renting out a room) – you will require consent to do this from the mortgage company;
- A sale and rent back scheme – under a sale and rent back (or sale and lease back) arrangement, you would sell the property at a discount in return for the option of remaining in the property as a tenant. Selling your home in this way may allow you to clear your debts and stay in your home, but you should proceed cautiously with this option and take the appropriate legal advice before committing yourself, because:
- (a) you will normally be paid less than the full market value of your home;
- (b) you may still have to leave after the fixed term of your rental agreement ends;
- (c) you could still be evicted if you breach the terms of your tenancy; &
- (d) if the person or firm buying your home gets into financial difficulties the property could still be repossessed.
- Voluntary Repossession – would be where you would vacate the property and hand the keys to the mortgage company. This should only be used as a last resort as you will:
- (a) continue to be responsible for the existing mortgage arrears together with any interest that accrues on these arrears until the property is sold;
- (b) have to pay the mortgage company’s sale costs;
- (c) still owe any remaining mortgage balance following the sale by the mortgage company;
- (d) may have difficulty obtaining loan finance in the future; &
- (e) may become homeless.
The Financial Services Authority (FSA) regulates these schemes, so make sure you deal with a regulated firm. Think carefully before choosing this option and ensure you read up on all facts.
If you require debt advice some local authorities offer free face to face debt advice to borrowers in financial difficulty. You can check whether this service is offered in your area by calling the local council offices.
Should you have any complaints against any mortgage company, The Financial Ombudsman Service will deal with these. However you must go through the formal procedure, having first complained to the lender via their internal complaints procedure.
By instructing Sintons you can be confident that we will handle your matter diligently, providing you with all the information you need to understand the process from start to finish.
If you require any further information please feel free to contact us.