10 steps to sorting out Mortgage arrears

Linda from Hastings
If you fall behind with your mortgage payments, you must take it seriously. But don't panic, a solution is just a few steps away…

Step 1. Contact your mortgage company as soon as you get into difficulties

Explain the problems you are having and tell them how much you can afford to pay towards the mortgage. If you have any mortgage protection insurance, check if you can make a claim.

Step 2. If you are unemployed or working part-time...

You may be entitled to Income Support (IS) or income-based Jobseeker's Allowance (JSA) to help with the interest payments on your mortgage. If you have a repayment mortgage, you will still have to pay the capital part of your mortgage. If you have an endowment mortgage, you will still have to pay the endowment policy value. But IS or JSA won't always cover all the interest, and there will probably be a delay before help with the interest starts so you still need to find some money. You may also be eligible for one of the new Government backed mortgage rescue schemes.

Step 3. If you don't receive IS or JSA you may be entitled to other benefits

For example, you could be paid tax credits if you work or have children. An advice agency should be able to help you work out what you could receive.

Step 4. Ask your mortgage lender if they will agree to accept reduced payments...

to cover only the interest for a time.

Step 5. If you have an endowment mortgage and you are behind on the payments...

Ask about changing to a repayment mortgage. You may be able to cash in the endowment. However, this is a big decision, get financial advice from an independent expert to ensure this is a good idea for you.

Step 6. Look at cutting your repayments by switching to a mortgage with a lower interest rate...

from a different mortgage lender. Shop around, and take independent expert advice.

Step 7. If your mortgage lender takes you to court for arrears...

Beware sale and rent back schemes!

These are unregulated and usually target desperate people. It is best to avoid them. But if you are tempted, get advice.

It is important that you go along to the hearing. You will need to show the court that you can pay your current monthly instalment (or the amount you need to pay on top of any IS or JSA you may be entitled to), plus a reasonable amount towards the arrears each month. The court will normally expect you to clear the arrears within the remaining term of the mortgage. If you can't pay this much, you should get advice before you go to the hearing. Your lender might agree to extend the number of years of your mortgage to give you more time to pay.

Step 8. If you reach an agreement in court to pay the arrears...

(often called a 'suspended possession order') you must stick to that agreement. Remember, you must continue with your current repayments as well. If you have problems keeping up with the terms of the order, contact your lender and get help from your local advice or law centre urgently. If you don't, you may well be evicted.

Step 9. If you don’t stick to the terms of a suspended possession order...

You will receive a letter saying that you will be evicted on a certain date by bailiffs. Even if this happens, you may still be able to save your home, but you must take action immediately. In certain cases, you may be able to have the eviction halted. This means applying to the court for a special hearing -you must get advice immediately if you are in this situation.

Step 10. If you are evicted for mortgage arrears...

the local authority may refuse to find you somewhere to live, even if you have children. This is because they may claim that you have made yourself homeless by not paying your mortgage. However, you can often challenge this kind of decision, but you will need expert advice to do this.