Consumer Credit Act
WARNING: YOUR HOME IS AT RISK IF YOU DO NOT KEEP UP PAYMENTS ON A MORTGAGE OR ANY OTHER LOAN SECURED ON IT.
If your mortgage loan is at any time at a variable rate, please note: THE PAYMENT RATES ON THIS HOUSING LOAN MAY BE ADJUSTED BY THE LENDER FROM TIME TO TIME.
If you choose an endowment loan, and the insurer does not guarantee that the proceeds of the policy will be enough to repay the loan when due, please note:
WARNING: THERE IS NO GUARANTEE THAT THE PROCEEDS OF THE INSURANCE POLICY WILLL BE SUFFICIENT TO REPAY THE LOAN IN FULL WHEN IT BECOMES DUE FOR REPAYMENT.
You should also note that in the case of endowment loans, early surrender of the policy may mean that you get back less than you have paid in premia and other charges.
Will arrears on loan create a difficulty?
Some home owners have problems paying their mortgages. This could be for many different reasons such as the end of a relationship, the loss of a job, or unexpected expenses such as having a baby. If you are having financial problems, you need to act quickly, even if the problems are only temporary. If you don't, you could lose your home.
Keeping up with your mortgage payments should be your top financial priority. If you are evicted because of payment problems (repossession), you could become homeless. This doesn't happen automatically, but the longer you delay, the more difficult it will become to control your arrears and avoid long-term debts. If you have already been threatened with repossession, get advice immediately.
If you fall behind on your mortgage payments, you need to take action straight away. In some cases, the problem can be solved if you act quickly. Don't wait until the debt becomes unmanageable. Many lenders charge penalty fees if you miss payments. The sooner you deal with the situation the more options you have, and the less chance that you will lose your home.
Contact your lender
If you have difficulty paying your mortgage (or think that you will have, for example because you have lost your job) it's important that to talk to your lender as soon as possible. Don't be put off because you think your situation is hopeless. There is often a solution. If you haven't yet decided what to do about the problem, explain to your lender that you are going to get specialist advice about your options.
Pay as much as you can
Paying your mortgage has to be your top priority, even if you are under pressure to pay other debts as well. Losing your home through repossession would only make your debt 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 trying to tackle the problem.
Mortgage payment protection insurance
Do you have insurance that would keep up your repayments for a time if you are unable to work because of illness, accident or being made redundant? Some people take this insurance out when they first take out their mortgage and then forget that it exists, as it may be included in your monthly mortgage payments.
If you have this type of insurance (which is different from a mortgage indemnity guarantee or life insurance), check the policy carefully. Many policies will not pay out until a few months after you are unable to work, and then for no longer than a year or two. You may need to make other arrangements to cover anything that is not covered by your insurance.
If you have lots of other debts as well as your mortgage, you may be tempted to take on a larger mortgage with another lender. This may enable you to pay off clear your debts, but it can also be risky. Even if the interest rate is lower, it may be difficult to afford a bigger mortgage. You may also have to pay arrangement fees. Get advice from an independent financial adviser before you decide.
Work out your 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 rising 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 need to consider:
- cutting back on non-essential spending
- increasing your income (through wages, welfare benefits or renting out a room)
- reducing your mortgage and/or insurance costs If none of these options are possible, or you want to leave, you may decide to sell your home voluntarily and move somewhere more affordable. You may also be tempted to give your keys to your mortgage lender, but this will probably increase your debts.
Working out your options can be complicated. You may want to get independent advice before you decide what to do. An adviser may be able to help you to negotiate with your lender. You can get free, specialist advice from a housing aid centre, citizens advice bureau. Many agencies have specialist advisers who can help you work out what option is best in your situation. Use Advice Services to find a service in your area.