Tackling mortgage arrears

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.

Get advice immediately if you're facing repossession

exclamation  If you've received a letter from your mortgage lender threatening court action for repossession, or you've had a letter from the court giving you a hearing date, find out how to get legal advice now and find out what you can do if you are facing repossession.

Make mortgage arrears a priority

If you fall behind on your mortgage payments (or a second mortgage or secured loan) and find yourself in arrears, you need to take action straight away to avoid your mortgage lender taking court action to repossess your home.

Mortgage problems can often be resolved without needing to go to court. Your lender is likely to offer you more options if you negotiate at an early stage rather than waiting until mortgage arrears become unmanageable.

The longer the problem is left unresolved, the more your debt is likely to grow.

Try to tackle the problem, because:

  • 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.

See Shelter's guide Mortgage arrears for more information on problems paying your mortgage.

Talk to your lender about mortgage arrears

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 your lender know that you are taking steps to put things right, and then get specialist housing or debt advice.

Get help from an adviser

 A specialist housing or debt adviser may be able to:

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

Use Shelter's directory to find face-to-face housing advice services in your area.

Pay as much as you can towards mortgage arrears

Even if you are under pressure to pay other debts, paying your mortgage should be your top priority. 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 about increasing your mortgage

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 – the Money Advice Service has more information on choosing a financial adviser.

Work out your finances and repayment 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:

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.

Use Shelter's Finance action planner to help plan your repayments for mortgage arrears. 

Don't walk away and hand back the keys

You should think very carefully if you are considering moving out of your home and handing 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 later need to apply as homeless your local council may decide that you have made yourself intentionally homeless, which may mean that the council only has a limited duty to help you. However, you could look for privately rented accommodation and check if you're eligible for housing benefit to help pay your rent.

Consider changing to a 'flexible' mortgage

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.

Reduce your insurance costs

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

Cancelling some of these policies may be an option, but this could be risky as 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.

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.

Keep to your agreement with your mortgage lender

It's very important to keep 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 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.

Use Shelter's directory to find face-to-face advice services in your area.

Make a complaint about your mortgage lender

If you believe that your lender has treated you unfairly, it is possible to make a formal complaint against them. You can do this either by using the lenders own internal complaints procedure, or by complaining to the Financial Conduct Authority (FCA).

Last updated: 1 January 2014