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mortgage-arrears

Mortgage Arrears

An arrear of any kind is something to be acted upon, but if it relates to your mortgage, it is advisable to do so as quickly as possible. After all, it is likely your mortgage is the largest and most important secured loan you owe.

The truth is stark: if you build up mortgage arrears and fail to repay them, your home could be repossessed.

However, don’t panic. This article will offer practical advice for dealing with mortgage arrears.

I’ve missed payments on my mortgage. What should I do?

Contact your lender, immediately (unless they’ve beaten you to it). Most mortgage lenders will ask that you top up your usual monthly payment to cover the arrears.

How can I repay my mortgage arrears?

Firstly, don’t panic. If your first thought is ‘I can’t afford to repay that debt’, take some time to consider your financial situation. It may be that, with some cost cutting and budgeting, you can satisfy your mortgage lender and repay the arrears you have built up.

Here’s what we suggest:

  1. Put together a household budget. Note your total monthly income and outgoings. Ignore unsecured loans such as credit cards; your immediate priority is now the mortgage arrears; the consequences of not paying those is far worse than what will happen if you miss a credit card payment. If you cannot afford to meet your other debts & cannot see a way to increase your income, an IVA may be an option.
  2. Once you know exactly what you have left after your income and expenditure, you’ll know what you can afford to pay towards your arrears. If there is little or nothing left, look at your expenditure and cut out anything you can live without. We all pay for non-essentials on a regular basis and can do without such luxuries if it means avoiding financial disaster.
  3. Contact your lender to arrange a meeting. Most mortgage lenders will listen intently to your situation. Be honest and provide them with a copy of your budget – it will help convince them that you are serious about repaying.

Should I try and increase my income?

If you’re struggling to find enough funds to cover the arrears after cutting your outgoings, it is advisable to look for ways to increase your income. For some, it might be a case of taking a second job. If that is impractical, you could consider either renting a room in your house, or renting the house entirely, although the latter might be considered nuclear due to the fact you will have to find alternative accommodation yourself.

Conclusion

Dealing with mortgage arrears can be boiled down to three simple rules:

  1. Contact your lender immediately to acknowledge receipt of the arrears notification. Beat them to it, if you can.
  2. Put together a household budget. Cut where necessary and without hesitation.
  3. Speak to your lender. Be honest and show them your budget. They are there to help you.
  4. Consider how you are going to address other debts.

 

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