Mortgage Arrears, the facts
How they affect you and your home
If you have missed mortgage payments– don’t panic!
For most people getting a mortgage is the biggest financial commitment they can make – no surprise then that it can sometimes cause sleepless nights.
While most people manage to make payments regularly throughout the lifetime of their mortgage, a significant number fall behind on their mortgage repayments and thus enter mortgage arrears.
Life is never certain and only a small change in circumstance can lead you into mortgage arrears through no fault of your own. This might include:
- Unforeseen bills e.g. essential home repairs such as flood damage or burst pipes; car repairs; medical bills
- A change in interest rates.
- A sudden decrease in income level for example, following unexpected redundancy
If you are in mortgage arrears you are not alone - Credit Action suggests that one million adults are falling behind with payments and a further 2 million are constantly struggling to make their repayments on their debt.
How do mortgage companies view mortgage arrears?
It’s worth bearing in mind that mortgage companies are not vindictive. They will do everything they can to bring about an amicable resolution when you enter a mortgage arrears situation.
However, if the arrears amount increases or you fail to show you are taking adequate steps to deal with your arrears then your mortgage lender will have no option than to take things further.
- A missed payment will be recorded if you fail to make 75% of the amount due in that given month
- Some lenders take into account missed payments on secured loans AND your main mortgage
- More recent missed payments will be held as more relevant than older ones
- Some schemes require you to pay any arrears up to date before any further financial support is forthcoming
- The more payments you have missed the ‘higher risk’ you will be classified
What happens if you continue to miss payments?
You mortgage lender is obliged to issue you a default notice before legal action can start – however, it doesn’t necessarily mean that the creditor will take you to court.
The default notice will give you at least seven days to comply with whatever action is required by the lender – if you act quickly you can prevent your mortgage default escalating to a CCJ, possession order or even eviction.
If you fail to respond to your default notice, the lender will issue a claim form – again this allows you to make representations concerning how you intend to pay off your debt.
The Remortgage Specialist can arrange a remortgage and make representations to the court even with defaults so that things don’t get taken any further.
If the court isn’t satisfied that you have done enough to remedy your mortgage arrears then the next step is a County Court hearing where you will appear before the district judge and the lender’s solicitor.
This is your opportunity to explain to the judge how you intend to take in order to pay off your arrears.
If you do not attend your hearing then things may escalate further – see our pages on repossession for more information.
