The fear of being unable to pay the mortgage or rent has become a reality for as many as one in five people in England, according to a recent survey by Shelter.
The housing and homelessness charity found 21% had struggled to keep up with their mortgage or rent payments. Meanwhile 10% were worried about being evicted from their home and 37% had cut back on essentials to ensure they covered the housing costs.
Over half had been kept awake at night worrying about the possibility of eviction.
These statistics are worrying, but they are also unsurprising since we are all aware how the cost-of-living crisis coupled with rising mortgage rates mean many homeowners are juggling much higher bills now than they were three or four years ago.
It may feel hopeless if you are facing the prospect of being unable to pay your mortgage – but the good news is there are solutions available to you.
Jonathan Bone, head of mortgages at online mortgage brokers Better.co.uk, explained the steps you can take if you are in this situation. Beginning with the most important one…
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Speak directly with your lender
“First and foremost, if you think you are about to miss a mortgage payment because you cannot afford the monthly payments, make sure you speak with your lender before this happens, so they do not come to you,” Bone said.
This may sound like a daunting prospect. However, Bone explained, if you don’t contact them, they will normally contact you within 15 days of a missed payment anyway.
By getting there first, and reaching out to the lender directly you can also allow them to provide support and solutions, he explained.
Indeed, most lenders have signed up to the Mortgage Charter, which outlines exactly, lenders must do if a customer is struggling with repayments
“No lender wants to repossess a home,” Bone said, “and it is only done as a last resort when it serves the borrower’s best interests.”
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Talk through your options
Bone explained there are several options open to borrowers struggling with repayments. These are, but are not limited to, the option to defer a payment, taking a payment holiday, increasing your mortgage terms to reduce your monthly payments or switching to only paying interest.
He suggested those who are unsure which option is most suitable should speak with a mortgage adviser “Talking to an adviser will mean that they can help understand your personal, individual circumstances and how they will impact the future of your property,” he added.
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Work out what you can afford
As part of the process of looking at your options, it is a good idea to look at your finances and calculate how much you can realistically pay towards your mortgage each month, Bone advised.
“If you have debt, you’ll have to arrange with your lender how you are going to pay the money back that you owe and how you are going to afford mortgage payments going forward,” he continued.
“Your financial adviser can help you work out how much money you have coming in and going out, to help you budget and understand what payments you can make.”
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Make an offer to your lender
Once you’ve had advice on your options and know what you can afford, Bone said, you then need to write a letter to your lender, explaining why you’re struggling to make mortgage payments, what you can afford, and how this is going to cover your mortgage payments going forward.
“You would also want to include a built-in review period, along with a copy of your household outgoings and budget,” he added.
“Under the Financial Conduct Authority (FCA), your mortgage lender has to deal with your case fairly and give you a reasonable chance to make arrangements to pay off any outstanding debt.”
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If your lender doesn’t accept the offer
If your lender won’t accept your offer, Bone said you should carry on making payments that are as much as you can afford.
“Lenders in some cases may take legal action, such as repossession of the property, if you cannot make payments or come to an agreement over the mortgage.
“In this circumstance, it is important that you get help to negotiate or come to some kind of arrangement from the lender so you don’t lose your home, as the process can be extremely stressful.”
