Mortgage Arrears – Finding Help

When you get into arrears with your mortgage, it is easy to become overwhelmed and rush into a rash decision, such as selling your home to pay off debts. However, there are other ways of dealing with mortgage arrears. The following information should help:

Financial Services Authority (FSA) – The function of the FSA is to set standards as to how financial companies deal with customers in the UK. A part of this function is to set standards regarding how these institutions deal with people in mortgage arrears. The FSA publish a guide to mortgage arrears, which you can view on their website.

The Mortgage Code – This was replaced by the FSA rules, but still applies to mortgages taken out before 31^st October 2004. Consumers can complain to the Financial Ombudsman Service under the mortgage code, which states that all cases of financial hardship and mortgage arrears should be considered sympathetically. Details of the Financial Ombudsman Service can be found on the internet.

Switching Mortgages – If it is becoming difficult to meet your mortgage payments, you could try switching mortgages to a different mortgage type or a different lender. The many comparison sites on the internet can help you to find the best deals. Bear in mind that there may be penalties for switching if you are tied in for a fixed term.

Other Arrangements - It is important to contact your mortgage provider as soon as you are having difficulty paying your mortgage. They are more likely to respond positively if you contact them at the outset, rather than ignoring mortgage reminders. They have a range of solutions that they could offer, such as, giving you a ‘payment holiday’ in exceptional circumstances, allowing you to pay interest only for a limited period, or extending the mortgage term.

Department for Work and Pensions (DWP) - They may pay some of the interest on your mortgage if you are in receipt of benefits, for example, Income Support, Jobseeker’s Allowance, or Pension Credit.

Repossession - Even after a lender has threatened to take you to court, it is not too late to contact them in order to come to an arrangement regarding payment of the debt. This might be a better option, because, if you hand the keys back, the lender may sell the property for a lower price than you anticipated, and you will be liable for any shortfall between the sale amount of the property, and the amount left owing on your mortgage.

Negative Equity - This term describes a situation where the total sum of loans secured on a property are in excess of the property value. It can present a problem if you want to move home as you will have to seek your lender’s permission. However, there are a number of arrangements that a lender could offer, for example, they may allow you to absorb some of the remaining debt into your mortgage on your new home. It is best to contact your lender if you are in this situation.

Court Action A lender cannot evict you from your home without a court order. Even if your lender takes you to court, it will not necessarily mean that you will lose your home. The court is not on the side of the lender; it is impartial and will give each party equal consideration. It is important, however, that you respond to the lender’s letters regarding the overdue amount, and offer to pay what you can afford, as the court will view this more sympathetically.

So, if you have become a victim of the credit crunch, don’t despair; there are things that you can do. The Citizen’s Advice Bureau and the National Debtline both offer free advice and information on mortgage arrears in the UK. They can both be found on the internet.