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If you can’t pay your mortgage
If you start to get into difficulties repaying your mortgage, remember two key points: Firstly, you are not alone. Currently, over 50,000 homeowners have mortgage arrears of six months or more. Tens of thousands, perhaps hundreds of thousands, more are in arrears by a smaller amount.
Secondly, burying your head in the sand won’t save your home. The sooner you seek help, the more likely you will be able to get back on track. There are plenty of places where you can get help, and plenty of specialists who can take you through the options. It may be that you feel embarrassed about having got into trouble, but the people you will be dealing with have seen it all before and will talk to you sympathetically.
Who to call
If you start to struggle, the first call you make should be to your lender. If you tell it you are getting into difficulties, it will pass you to a specially trained adviser who can give you all your options. All residential mortgages are bound by the Financial Conduct Authority’s (FCA’s) code of practice, which in three words is to ‘treat customers fairly’ and these regulations mean they have to treat you sympathetically.
If you also want independent advice, there are two main organisations that can help. Both Citizens Advice and the Consumer Credit Counselling Service can help people with all types of financial problems, not just mortgage arrears. Their services are free.
Be wary of commercial organisations that look to consolidate all your loans or negotiate reduced payments, often through Individual Voluntary Arrangements (IVAs). These firms often have very high fees that are added to the outstanding debt, and they may also tie you in to long term payment plans, which may be unsustainable in the long term. For some people they can be useful, but probably for fewer people than actually use them.
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Prioritise
Chances are, if you’re struggling with your mortgage repayments you’re going to be behind on other debts too. So you need to prioritise.
The bills you need to pay first are the ones that protect your home, and could end up in a prison sentence if you don’t pay (like council tax). So, if you can keep up to date with your mortgage, your heat and light bills and your taxes, then pay them first. If you have any other secured debts – ie, those that could end in repossession of your home, then add that to the list.
Unsecured loans – credit cards, storecards, unsecured personal loans – should take a lower priority. You will lose any good credit rating you may have, and the lender can take you to court, but you won’t lose your home if you don’t pay.
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