Missed a mortgage payment? Here’s what to do.

No one ever plans to miss a payment, but what happens if you do? 

Pick up the phone!

Firstly, if you miss a mortgage repayment and have payments overdue, you're technically in what lenders call 'arrears'.

If you find yourself in this situation it's important that you make contact with your lender straight away - pick up the phone and give them a ring. Being proactive is the most important thing and will help minimise impact.

If you don't communicate with your lender you'll automatically trigger their arrears process and start the countdown to repossession. So reach out to your lender, they'll want to help you find a solution and negotiate a new repayment strategy.

What is the arrears process?

If you fall into mortgage arrears, then within the first 15 days your lender must:

• List the payments you've missed
• Tell you the total arrears amount
• Provide the amount outstanding on your mortgage
• Give you a reasonable amount of time to make any overdue payments
• Tell you what charges you will incur because of missed payments

How can I have that conversation?

First thing is to remember that your lender isn’t evil, and they’re not out to get you. 

If you're behind on mortgage repayments the most important thing is to be proactive. The sooner you talk to your provider and explain the situation, the sooner you can try and negotiate a repayment plan that makes things feel a bit more achievable.

You might even be eligible for government help, but to claim you'll need to speak to your provider first.

You can try presenting these solutions to your lender:

• If you’ve missed one payment, suggest repaying it over three months.
• Ask if you can add the arrears to your total debt and pay it back over the lifetime of your mortgage. This could cost you more because you'll be paying interest on that additional amount but it may buy you some time to get back on track.
• Ask if you can pay interest-only each month for an agreed period.
• Ask for a payment holiday for a few months to give you time to get your finances sorted.
• See if you can extend the mortgage term to reduce your monthly payment to make it more affordable. This will depend on your age and other criteria.
• Avoid taking out an extra short-term loan to repay mortgage arrears because this could be more expensive and increase your debts.

When talking to your lender, the most important thing is to make the first move. If you contact them ahead of time or as soon as you miss a payment, they are much more likely to be accommodating and work with you on a solution than if they have to hunt you down. 

What should you do if you haven’t missed a payment yet, but are worried about it?

Again, the first step here is to call your lender. If you’ve not yet missed a payment but you’ve had a loss of income and need some support, the best thing is to get ahead of the problem. 

To help people with mortgages during the current cost of living squeeze, the government and the Financial Conduct Authority (FCA) has agreed with the majority of mortgage lenders principles to help those struggling with their finances. This means:

• Anyone worried about their mortgage repayments can call their lender for information and support, without any impact on their credit score and we would encourage you to contact your bank who are there to help.
• Customers won’t be forced to have their homes repossessed within 12 months from their first missed payment.
• Customers approaching the end of a fixed rate deal will be offered the chance to lock in a deal up to six months ahead. They will also be able to apply for a better deal right up until their new term starts, if one is available. 
• A new agreement between lenders, the FCA and the government permitting customers to switch to an interest-only mortgage for six months, or extend their mortgage term to reduce their monthly payments and switch back to their original term within the first six months, if they choose to. Both options can be taken without a new affordability check or affecting their credit score.
• Support for customers who are up-to-date with payments to switch to a new mortgage deal at the end of their existing fixed rate deal without another affordability check.
• Providing well-timed information to help customers plan ahead should their current rate be due to end.
• Offering tailored support for anyone struggling and deploy highly trained staff to help customers. This could mean extending their term to reduce their payments, offering a switch to interest only payments, but also a range of other options like a temporary payment deferral or part interest-part repayment. The right option will depend on the customer’s circumstances.

If you are looking to have a payment holiday you will agree to a personalised plan for your circumstances with your lender.

Is a repayment holiday right for me?

A mortgage repayment holiday could help relieve some of the immediate financial pressure that you may be under. However it’s important to keep in mind that the terms of your mortgage repayments will change once the payment holiday is over. You should carefully consider what the impact of taking a mortgage holiday will be on your day-to-day finances in the longer term. 

For example:

• Is the disruption to your finances temporary and will you be able to manage potentially higher mortgage repayments once things get better?
• If your mortgage repayments increased, could you reduce your outgoing spending over the next few months? 
• Do you have other debts you need to consider?
  
  

A mortgage holiday could give you some financial headspace and help you get through a difficult period, but it’s important to ensure that it will help you long term and not simply delay the problem

Need more help?

If you need further support you could try Stepchange’s free online debt advice tool to create a tailored budget and to receive a personalised action plan. Or call Stepchange directly (free from all landlines and mobiles) and speak to one of their expert advisors.