Tackling mortgage arrears

This content applies to England only.

Housing laws vary between England and Scotland. Get advice relating to Scotland

Mortgage arrears don’t automatically lead to your home being repossessed, but it is important to act quickly and take control before mortgage arrears put your home at risk.

If you need help tackling mortgage arrears, use our directory to find face-to-face housing advice services in your area that can help.

Make mortgage arrears a priority

If you fall behind on your mortgage payments (or other secured loans) and find yourself in mortgage arrears, you need to take action straight away to avoid the situation getting out of control. In many cases, the problem can be resolved without needing to go to court.

Don't wait until mortgage arrears become unmanageable. The longer the problem is left unresolved, the more your debt is likely to grow:

If nothing changes, your mortgage arrears are likely to increase.
Many lenders charge penalties for each missed payment.
If the case goes to court, your lender may be able to charge you for their legal costs and court costs, which can easily run into hundreds or even thousands of pounds.

Talk to your lender

If you are worried about paying your mortgage it's important that you talk to your lender as soon as possible. Don't ignore their phone calls or letters as this will only make matters worse. There is often a solution, but it usually involves negotiating with your lender.

If you haven't yet decided what to do about the problem, it is still important to speak to your lender as soon as possible. Let them know that you are taking steps to put things right, and then get specialist housing and/or debt advice (see below).

Get advice on mortgage arrears

Dealing with your lender can be complicated especially if you are not sure what options are available to you. It is always a good idea to get independent advice before you decide what to do. A specialist housing or debt adviser may be able to:

help you to work out a household budget
explain all the options available to you
help you put together a realistic proposal which is affordable.

If you need help, use our directory to find face-to-face housing advice services in your area. Alternatively, visit the Money Made Clear website for more information about staying on top of your mortgage.

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 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 serious about trying to tackle the problem.

The more you get into mortgage arrears, the more likely you will be to lose your home.

Be cautious

If you have lots of other debts as well as mortgage arrears, you may be tempted to take on a larger mortgage with another lender. This may enable you to clear your debts in the short-term but it can also be a very risky approach. Even if the interest rate is lower, it could be difficult to afford. You may also have to pay arrangement fees for any new mortgage. Get professional advice about what you can realistically afford before you make your decision (see above).

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 increasing 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 should consider some or all of the following options:

cutting back on non-essential spending
increasing your income (through working extra hours, claiming support for mortgage interest)
renting out a room
reducing your mortgage payments
reducing your insurance costs.

If none of these options are possible or you want to leave anyway, you could try to sell your home voluntarily and move somewhere more affordable, although in a weak property market this may take time, and offers you receive could be lower than you expect.

Do not be tempted to hand in your keys to your mortgage lender. This is likely to increase your debts, and if there is a shortfall in repaying the loan even after the home has been sold, you will still be responsible for payment of that shortfall. It will also make it more difficult for you to get a mortgage in the future.

If you subsequently need to apply as homeless your local council may decide that you have made yourself intentionally homeless, which may mean that they only have a limited duty to help you. However, you could still apply for housing benefit, and you would then have to look for privately rented accommodation.

'Flexible' mortgages

Flexible mortgages give you more freedom to make repayments at the speed you choose. If you have this type of mortgage, you may be able to decrease your monthly repayments, 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 let you to catch up on any missed payments later. Speak to your lender as soon as possible to see if this option is available to you.

Reducing your insurance costs

You might be able to reduce the amount you pay on insurance by finding cheaper policies for your contents, buildings, and life insurance, or your mortgage protection insurance.

However, if your life insurance is tied to an endowment policy, cashing in or selling your policy may be unwise because:

if you have been paying into your endowment for a long time, you will lose out on some of the growth that has already occured
you would need to set up and pay for another way to pay off your mortgage at the end of the term.

Always talk to an independent financial adviser before taking any action regarding an endowment policy. In many cases the best option will depend on your personal circumstances.

It's also possible to cancel some of these policies, but this could be risky and you may need to rely on them in the future. If you cancel your contents insurance, for example, you need to consider how you would cover the cost of replacing the contents of your home without the insurance in the event of a fire, for example. However, you can't cancel your buildings insurance policy altogether as this is normally a condition of your mortgage.

Stick to the agreement

It's very important to stick to any agreement you make with your mortgage lender. If you don't, you may lose their trust and it will probably be more difficult to negotiate with your lender in future.

However, if you have already negotiated an agreement but you are having problems sticking to it, get advice immediately. An adviser may be able to help you to persuade your lender to negotiate further changes to what has been agreed.