Having problems with mortgage arrears?

With the impact of the credit crunch taking a bigger bite out of all our pockets, I thought I would take a look at what we should do if you were struggling to make payments on your home or you have mortgage arrears.

Contact your mortgage lender

First thing to bare in mind is that lenders have procedures for helping people who are experiencing payment difficulties. The next thing to do is contact your lender - they'll not bite your head off, as they are compelled by regulation to treat your fairly and take into account your circumstances. Ideally your mortgage company will structure a payment plan to help you through your difficulties.

Struggling to make payments?

Your lender can do various things to help you in your time of trouble. However, what they can do is dependent on your payment history and the duration of your financial problem. The lender may agree to:

• Reduce your monthly payments for specified time,
• Allow you to change to an interest only mortgage,
• Allow you a payment holiday,
• Extend the term of your mortgage, reducing your monthly payments,

Already have mortgage arrears?

If you have mortgage arrears your mortgage provider may suggest that the arrears is paid off gradually alongside your regular payments. If you don't think that you'll be able to afford the extra payments, you may be allowed to add the arrears to your mortgage or even delay the arrears payments. The decisions any lenders make will of course be dependent on your payment history.

Every penny helps!

Try, every month to pay as much as you can afford. Regular payments indicate to your mortgage lender that you are committed to paying off your mortgage. This is likely to result in your lender looking more sympathetically on your case and it also decreases the mortgage arrears charges.

Mortgages taken out after October 31 2004

If you have taken out a mortgage after this date then it is regulated by the FSA, (Financial Services Authority). The FSA regulations ensure that you are treated fairly by your lender and that you are kept up to date about your mortgage arrears with regular statements.

Failing to make regular payments

It is stating the obvious, but don't ignore your mortgage payments. Mortgage payments are classed as a priority debt and should be top of your list of things to pay. If you don't your lender will repossess your house and sell it.

Do statement of affairs

This is an excellent way of working how much you spend and how much you earn. Having it down in black and white allows you to assess where savings can be made and which debts to prioritise. Visit our debt forum for help and advice on how to save money or follow this link for more information on debt management strategies.

Increase your income

This can be achieved through benefits such as Council Tax Benefit, Child Tax Credit or Working Tax Credit. Alternatively if you have exhausted these benefits you could look at getting extra work. Use any additional money earned to pay off your mortgage arrears.

Worse case scenario

Your house will be repossessed by your lender. They will then sell it and any short fall in the amount owed will be pursued by them. However, this debt is not a secured debt and as such is not classed as a priority debt. This means that the lender cannot repossess any assets or possessions. However, the mortgage company is allowed up to 12 years to recover the debt.

The stress and anguish on having mortgage arrears or struggling to make payments makes this a very difficult time in anybodies life. What is crucial is that you have a plan about how to deal with this problem. You must talk to your mortgage provider; get your spending under control; try and earn extra income; speak to Debt Watchdog and be calm. If things are not working out, you may end up having to consider moving out of your house, which after all is causing you so much stress. Either trade down to cheaper house or look at renting after all having your house repossessed is much worse than any these.

Money should not be the greatest worry in your life; there are many more important things than that. So if you are facing bankruptcy, house repossession or struggle with managing your finances seek out professional advice. After all with personal debt rising by £1million every 4 minutes you are not alone.