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An increasing number of homeowners in the UK are experiencing mortgage arrears, as the implications of the current financial climate become increasingly difficult to cope with and costs rise.
Mortgage arrears are particularly emotive and difficult as they are secured against a person's most precious asset - their home. The risk of falling behind with mortgage payments is repossession of your home. This is a highly stressful situation for the debtor and their family, both in terms of having to find somewhere new to live in an unpleasant and stressful time, and even with the risk in the current struggling market that the forced house sale may not cover the mortgage debt leaving an unsecured shortfall. It can also have a negative affect on your credit rating - mortgage defaults seriously damage credit ratings and can make it very difficult for you to obtain one, on decent terms, in the future.
Remember too that repossession is a danger when arrears occur with any payment secured against your home - including debt consolidation loans.
For these reasons, it's worth getting the facts about mortgage arrears and your options as early as possible. As ever with financial difficulties, consider speaking to an expert advisor or agency who can offer different solutions and guidance tailored to your particular circumstances. Some useful things to know are:
Every mortgage lender will have its own definitions about what constitutes arrears and what the rules are for dealing with them. Make sure you understand the T's and C's on your mortgage or loan. For example, some lenders reserve the right to repossess your home after a mere three months worth of missed payments - whereas others will only consider you to be formally in arrears after six payments have been late within a year. Once you start getting into arrears, extra charges for missed payments start to be added to the account increasing the debt amount yet further.
For this reason, it's vital that you get in touch with your lender, and seek good advice as early as you can - ideally at the moment you anticipate you'll be late on a payment for the first time. This willing attitude will serve you well - many mortgage companies will consider offering a payment break, or a payment reduction for an agreed period of time if they are aware of any changes to your circumstances and have discussed it with you. This will also prevent your credit risk from being damaged and avoid the risk of immediate repossession.
In the long term, however, you may need to consider whether you can continue with the loan. Think broadly and long-term - could you sell the house and downscale to something smaller? Could you increase your income or cut your spending to keep more aside for the mortgage? Could you renegotiate a longer mortgage term, or switch to an interest only deal for a short time? Or could you rent out a room or two to a lodger - the government allows a certain amount of rental income to be tax free per year. Think broadly and long term - and most importantly seek advice and keep in regular touch with your mortgage lender.
