Tackling mortgage arrears

This content applies to England only.

Housing laws vary between England and Scotland. This page applies to England only. Get advice relating to Scotland

Keeping up with your mortgage payments should be your top financial priority. Your home could be repossessed if payment problems continue. This doesn't happen automatically, but the longer you delay, the more difficult it will become to control your arrears and avoid long-term debts.

If you have already been threatened with repossession, contact a local advice centre as soon as you can. Use our directory to find one.

Act quickly

If you fall behind on your mortgage payments, you need to take action straight away. In some cases, the problem can be solved if you act quickly. Don't wait until the debt becomes unmanageable. Many lenders charge penalty fees if you miss payments. The sooner you deal with the situation the more options you have, and the less chance that you will lose your home.

Negotiate with your lender

If you have difficulty paying your mortgage (or think that you will have, for example, because you have lost your job) it's important that to talk to your lender as soon as possible. Don't be put off because you think your situation is hopeless. There is often a solution. If you haven't yet decided what to do about the problem, explain to your lender that you are going to get specialist advice about your options.

Most lenders will expect you to come up with your own plans for paying off your mortgage, rather than making suggestions as to what you should do. You need to show that you will be able to pay of any arrears you have and keep up with future payments until your mortgage is completely paid off. If you haven't worked out your options yet, it's still important to speak to your lender as soon as possible, to let them know that you are taking action to put things right.

You can either write to your lender or make an appointment to discuss your situation in person. You will need to:

• produce a detailed statement of your income, spending and debts
• explain any plans you have to increase your income or reduce your spending
• explain what changes you would like to make to the mortgage and how the new arrangements will affect the future payments

Your lender will consider your proposal and decide whether to accept it. You may have to negotiate further. If you switch to a different mortgage, particularly if it is with a different lender, you may have to pay a redemption penalty. It may be possible to add any fees or redemption penalties to the your mortgage and pay them off over the rest of your mortgage term.

Get advice

Negotiating with your lender can be complicated, especially if you are not sure what options are available. There are a lot of options for lenders but they can sometimes be reluctant to use them. You may want to get independent advice before you decide what to do. A specialist adviser can help you to look at all the options and put together a realistic and affordable proposal. Contact the National Debtline or find a service in your area.

Pay as much as you can

Paying your mortgage has to be your top priority, even if you are under pressure to pay other debts as well. Losing your home through repossession would only make your debt problems worse, so it's essential to keep paying as much as you can afford. This will help to stop your mortgage arrears from rising too quickly. It will also show your lender that you are trying to tackle the problem.

Mortgage payment protection insurance

Do you have insurance that would keep up your repayments for a time if you are unable to work because of illness, accident or being made redundant? Some people take this insurance out when they first take out their mortgage and then forget that it exists, as it may be included in your monthly mortgage payments.

If you have this type of insurance (which is different from a mortgage indemnity guarantee or life insurance), check the policy carefully. Many policies will not pay out until a few months after you are unable to work and then for no longer than a year or two. You may need to make other arrangements to cover anything that is not covered by your insurance.

Be cautious

If you have lots of other debts as well as your mortgage, you may be tempted to take on a larger mortgage with another lender. This may enable you to pay off clear your debts but it can also be risky. Even if the interest rate is lower, it may be difficult to afford. You may also have to pay arrangement fees. Contact an independent financial adviser or the National Debtline before you decide.

Work out your options

The best way for you to sort out your payment problem will depend on your individual circumstances. If you want to stay in your home, you will need to find a way of stopping your arrears from rising while keeping up with your future payments. You also need to pay off any arrears that have built up so far. To do this, you need to consider:

• cutting back on non-essential spending
• increasing your income (through wages, benefits or renting out a room)
• reducing your mortgage and/or insurance costs

If none of these options are possible or you want to leave, you may decide to sell your home voluntarily and move somewhere more affordable. You may also be tempted to give your keys to your mortgage lender but this will probably increase your debts.

Reducing your mortgage payments

Although you will eventually have to pay back the whole of your mortgage, there are several ways that it might be possible to change it to make your monthly payments more affordable, including:

• taking a 'payment holiday'
• switching to a different mortgage
• adding your arrears to your mortgage
• extending the number of years on your mortgage
• reducing or stopping your capital repayments temporarily
• reducing or stopping your endowment policy (or other investment) temporarily
• surrendering or selling your endowment policy or other investments

The best solution usually depends on the type of mortgage you have and your age and personal circumstances, including how much you owe, how much you can afford to pay each month and how many years are left on your mortgage.

'Flexible' mortgages

Flexible mortgages give you more freedom to repay at the speed you choose. If you have this type of mortgage, you may be able to decrease your monthly or take a 'payment holiday' and pay nothing for a few months. Some lenders will only allow you to do this if you have made extra payments beforehand but others may allow you to catch up on any missed payments later. If you need to do this, you should talk to your lender as soon as possible.

Reducing your insurance costs

It may be possible to reduce your buildings insurance, contents insurance, life insurance and/or payment protection insurance. You can't stop your buildings insurance policy altogether (it's normally a condition of your mortgage) but you may be able to find a cheaper policy. Contents insurance, life insurance and mortgage protection insurance can sometimes be reduced. It's also possible to stop them but this could be risky. If you do this, you need to consider how you would pay off the rest of your mortgage or cover the cost of replacing the contents of your home without them.

Stick to the agreement

It's very important to stick to any agreement you make with your mortgage lender. If you don't it will probably be more difficult to negotiate with your lender in future. If you have already negotiated an agreement but are having problems sticking to it, get advice immediately. An adviser may be able to help you to persuade your lender to change what was agreed.