If you are struggling to meet your monthly mortgage payments you can take comfort from the fact that you are not alone and, more importantly, help is available if you are prepared to tackle the problem head on. Here is what you need to know.
If you are facing up to mortgage meltdown, there are essentially five steps you can take (if things are really bad, skip straight to step 4 as steps 1, 2 and 3 can be done at the same time):
1. Face up to the problem.
It is all too common for homeowners to ignore the problem and hope it will go away. It won’t and leaving it to fester will only make matters worse. For one thing, your lender will inevitably take a dim view, which will certainly not help when you eventually have no choice but to ask them to help.
2. See if you can reorganise your finances to save money.
Recognise that, along with food and heat, your home is your absolute priority. Look critically at everything you spend money on and ask yourself if you really need it. In the end, cutting back on non-essentials might not be pleasant, but it’s worth it if it helps to keep you in your home.
Remember too that if you do this and still have to approach your lender for help, being able to detail the steps you have taken to try to meet your payments will show that you are serious about addressing the problem – and that can’t hurt either.
3. Get professional advice on dealing with debt and mortgage arrears, for free.
The following organisations are all geared up to help with specialist advice. It’s all confidential, you won’t be judged and it’s free:
- Citizens Advice Bureau - Visit www.citizensadvice.co.uk to find your nearest centre.
- National Debt Line - Phone 0808 808 4000 or visit www.nationaldebtline.co.uk.
- Shelter – Call 0300 3300515 or visit www.shelter.org.uk.
- Payplan – Call 0800 917 7823 or visit www.payplan.com
- The Consumer Credit Counselling Service – Call 0800 138 1111 or visit www.cccs.co.uk
These organisations will usually start by helping you to work out your household budget - to determine the scale of the problem and ensure they can give you the right advice – so it may help to do a little preparation before you go. This checklist will help you to gather the right information and ensure you get the help you need more quickly.
4. Speak to your mortgage lender.
Clearly this is not a step that anyone wants to take and it will be a daunting prospect. However, it is vital that you are not put off and make contact as soon as you run into payment problems. It is often possible to come to an agreement with your lender that will help you to either make payments, or at least take the pressure off while you take steps to get back on your feet financially.
When you speak to your lender, it is worth remembering that mortgage lenders should only repossess homes as an absolute last resort. Instead, your lender should work with you to find a way to ensure that you do not lose your home. For instance:
- They may agree to extend the term of your loan – thereby bringing down the monthly payments (though you’d end up paying more for the loan overall because interest would be applied for longer)
- They may also agree to accept smaller payments in the short term
- It may be possible to stop making payments for a while, though the arrears will be added to your overall debt.
This fair treatment should be applied to all mortgage customers. If you feel that you are being treated unfairly, you must complain to Financial Services Ombudsman. You can contact the Ombudsman by visiting www.financial-ombudsman.org.uk or by calling 0845 080 1800.
5. Seek help from a government scheme.
If you are having serious problems paying your mortgage and are in real danger of losing your home, there are a number of schemes that may help you. They are:
The Mortgage Rescue Scheme
What is it?
A government scheme run by your local council. If you are a pregnant woman, have dependant children or are vulnerable through old age, physical or mental impairment, you could qualify for financial help.
You may also qualify if:
- Your household income is less than £60,000 per year
- You don’t own a second home, including a home abroad
- The value of your mortgage is less than 120% of the value of your home
- The value of your home is below a certain limit (check with your council, because the limit varies from region to region)
How do I apply?
You will usually be referred to the Mortgage Rescue scheme by your mortgage lender, by the Citizens’ Advice Bureau or by the courts, though you may also apply directly to your local council.
What help might I get?
You will usually get some advice on budgeting as a starting point. However, you may also qualify for some more meaningful help, usually delivered via a Registered Social Landlord (e.g. Housing Association), such as:
- A shared equity loan – the social landlord will provide a loan to pay off some of your mortgage and bring down your monthly payments. You would pay a low, interest only amount for this loan each month.
- Government mortgage to rent – the social landlord buys your home for 97% of its market value, then rents it to you at 20% less than the market rate in your area.
Homeowners Mortgage Support
What is it?
A government scheme designed to help people cope with an unexpected, short term fall in household income – for instance if you are relying on one income rather than two, are unable to work overtime as normal or have had your working hours cut.
The scheme may allow you to defer interest payments on your mortgage for up to two years, thereby cutting your monthly payments. However, not all mortgage lenders have signed up to provide Homeowner Mortgage Support.
How do I apply?
You need to check that your lender offers the scheme and, if it does, make contact direct.
What help might I get?
If you are accepted on the scheme, you:
- Will need to agree new monthly payments with your lender based on how much you can afford to pay.
- Will have to pay at least 30 per cent of the interest due on your mortgage each month.
- Can take advantage of the reduced repayments for up to two years.
- Will have what you put off paying added to your mortgage balance.
- Will have to pay back this money, when you return to making full repayments.
Support for Mortgage Interest
What is it?
A scheme that provides help with mortgage interest payments to some people on state benefits (Income Support, income-based Jobseeker’s Allowance, income-related Employment and Support Allowance, and Pension Credit). The scheme is designed to provide help towards monthly payments on loans used to buy or improve your home.
How do I apply?
You should contact Jobcentre Plus or the Pension Service to find out if you are eligible for the support for mortgage interest scheme and make a claim.
What help might I get?
If you are successful in applying for Support for Mortgage Interest, you:
- Will get help paying the interest on your mortgage (on mortgage values up to £200,000) – this will usually be paid direct to your lender.
- Will have to wait 13 weeks before the help is delivered. This is called the Waiting Period.
