Handling Mortgage Arrears
I have listed below some of the best ways you can cope with
mortgage arrears and threatened repossession. Do not forget to
get proffessional advice if you are experiencing problems. As
every persons circumstances are different this guide should not
be read as a be all and end all.
1. If you have a mortgage payment protection plan (MPPI)with an
insurance company or your lender then you may receive help in
paying your mortgage if you fall ill, become unemployed etc.
Remember to check the minimum claim period for your policy most
do not pay out during the first 3 months of a claim. The better
ones pay out from the 30th day of a claim with payments
backdated to day 1. These are a little more expensive but worth
the cost
2. Mortgage Indemnity policies taken out as part of a mortgage
may belong to the lender even though you will have paid the
premium. Occasionally such policies do not cover the whole of
the outstanding mortgage so that if the property is repossessed,
sold and the plan cashed in you may still owe the lender money
if there is a balance outstanding. The insurer also has the
right to pursue you for the amount they paid to your lender
Many mortgage lenders have now abolished these plans as a
condition to taking out a mortgage.
3. You may be entitled to help from the DWP with payment of the
mortgage interest if you are out of work or on a low income. You
should check with the DWP to find out if you are entitled to
extra help in paying your mortgage. The benefits agency normally
pays in the case of loans taken out before 2nd October 1995.
They will normally pay the interest on loans for the purchase,
repair or improvement of the home. They will not pay the capital
element of the monthly repayment or the premiums for any
endowment or life policies.
However the DWP will pay nothing for the first 8 weeks and then
50% of the mortgage interest for the next 18 weeks, followed by
the full housing costs after 26 weeks.
For loans taken out after the 1st October 1995 nothing is paid
for the first 39 weeks, but then the full payments are paid
after 39 weeks, or in the case of a single parent or carer the
payments are paid after 26 weeks
4. Rescheduling your loan payments by spreading it over a
greater number of years or reverting to interest only payments
may also help if you have problems paying the current monthly
repayment. Most lenders will charge a fee for making amendments
to the loan but in most cases this is added to the balance of
the mortgage account. Your lender may be able to offer a fixed
or discounted rate to ease your troubles, however you need to
get in touch quickly if they are to help in this way. Once you
are in arrears if you have not communicated well with them they
are unlikely to be over helpful.
5. If there are now lenders offering good interest rate, even if
you have mortgage arrears, so it may be worth considering a
remortgage particularly if you have other expensive credit
agreements draining your resources. If you have sufficient
equity you may be able to consolidate your debts and reduce your
outgoings to a manageable level. Lenders will not do this if
there is a "negative equity".
6. As a final option if all else fails and you are unable to
stop your lender repossessing your property you might still be
able to convince them to allow you to remain in the property as
a tenant paying rent so that you do not lose your home
altogether. This may be possible if the property has a negative
equity and will not fetch much money on a sale.
7. The most important piece of advice I can give you is to get
professional advice from either an Independent Financial
Advisor, Mortgage Advisor, Solicitor or Debt Consultant and
don't forget to communicate with your lender. They are far less
likely to repossess if you keep them informed of what is going
on.