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If you're struggling to pay your mortgage every month, you're not alone. But don't bury your head in the sand. So if you’re thinking ‘I can’t pay my mortgage: what are my options?’ Here’s what you need to know.
You’re not alone: nearly 94,000 homeowners are in mortgage arrears, according to the latest figures from UK Finance. And experts fear the numbers struggling will rise as the cost of living crisis continues to bite; the Bank of England estimates around 5 million homeowners will see their monthly mortgage payments rise between now and 2026. But there are options – here’s what to do.
Your first step should be to speak to your lender. In response to the cost of living crisis, the Government launched a new charter, alongside the Financial Conduct Authority, designed to offer short-term support if you’re struggling to pay your mortgage, but not yet in arrears. Lenders representing 97% of the UK’s mortgage market have signed up to the charter and agreed that:
If the support under the Mortgage Charter isn’t enough, or you are already in mortgage arrears, speak to your lender asap. Lenders can offer tailored support, under ‘forbearance’ rules. While some of the options may be similar to those offered in the Mortgage Charter, they can work in the longer-term, although they’ll involve the lender doing an affordability check and it can affect your credit report once it’s in place.
These may include:
However, while these will help you in the short-term they will add to the overall cost of your mortgage in the long term, so switch back to your normal payments as soon as you’re able to.
Once your lender has explained the options available to you, it is time to go away and work out the best option for you.
You can get free advice from the Citizens Advice Bureau. They can help you check if you are eligible for benefits or government schemes that could help with your mortgage repayments. You can also get help drawing up a monthly budget. Other options for free advice include Shelter, National Debtline and StepChange.
Once you’ve had financial advice, drawn up a budget, taken steps to boost your income if possible and cut your outgoings (read on for more on these) you will have a clear picture of what you can afford to pay off your mortgage each month.
Now it is time to write an offer letter to your lender to say what you would like to do as you can’t pay your mortgage.
Your mortgage offer should include:
If you are unhappy with the response, you receive you should discuss it with them. You can then escalate it to a formal complaint if you are still unhappy, which they should acknowledge in five working days.
After that you can report your lender to the Financial Ombudsman Service if you haven’t received a satisfactory agreement.
You may be able to access government help. There are numerous schemes we set out below:
If you’re entitled to certain benefits, you may be able to get a government loan to help you pay the interest on your mortgage.
You need to be claiming either: income-related Employment and Support Allowance, income-based Jobseeker’s Allowance, Income Support, Universal Credit or Pension Credit to qualify.
If you claim one of those benefits the government may give you a loan to cover the interest on up to £200,000 of your mortgage, or up to £100,000 if you’re getting Pension Credit.
The government usually pays the loan straight to your mortgage lender.
In some parts of the UK, there are government Mortgage Rescue schemes. There isn’t anything at present in England.
In Wales some local authorities and housing associations offer mortgage rescue schemes designed to help you avoid repossession if that would leave you homeless. You can find out more about these schemes at Shelter Cymru.
If you live in Scotland, then there is the Home Owners’ Support Fund. This covers two schemes. The first is the Mortgage to Rent scheme where a social landlord buys your home and you rent it back from them. The second is the Mortgage to Shared Equity scheme where the Scottish Government buys up to a 30% share of your home to reduce your mortgage. You then have ten years to buy back the government’s stake in your home otherwise it will remain a shareholder until you sell the property
This service is designed to help people living in England or Wales who are at risk of being evicted from their property if their mortgage is in arrears. Under the Housing Loss Prevention Service, you’re entitled to early legal advice if you’re at risk of possession proceedings and loss of your home, this advice can be provided in relation to housing, debt and benefits issues.
If you can’t resolve the matter and you’re asked to attend a court hearing, a housing adviser can also give free legal advice and representation at the court. So, you’ll find they are usually eager to help you come up with a solution that will allow you to continue repaying your mortgage.
If you’re in mortgage arrears, you may be able to get help in the form of Breathing Space, which could give you up to 60 days’ break from interest, fees and court action. It is a government scheme and sometimes called The Debt Respite Scheme or The Breathing Space Scheme. While in Scotland you may be able to apply for a ‘debt moratorium period’ while you arrange certain debt solutions.
Depending on the reason you can’t pay your mortgage you may be able to get some help from insurance policies you already have. There are three different policies that may help depending on your circumstances:
You can read more about these products in our guide Do I need mortgage protection? If you can’t pay your mortgage because you have had a sudden drop in income due to a job loss, illness or accident then any of these insurance policies could throw you a valuable lifeline.
Depending on your circumstances you may be able to remortgage to reduce your mortgage payments. You can speak to fee-free brokers L&C on the phone or start the process online today. Or you may consider speaking to a specialist lending broker, such as Chartwell Funding. They’ll have access to a range of products, such as bad credit mortgages, that are not typically offered by High Street lenders – although they’ll always check your options with mainstream lenders first.
You may also find it useful to speak to an independent financial advisor. They can take a look at your complete financial situation covering everything from your savings, pensions, income and mortgage to see where you might be able to improve things. Read our guide to see if you need an independent financial advisor and our guide to financial advice fees so you know what they are likely to charge.
You don’t have to make life’s big financial decisions alone. Get the right IFA for you today with our partners at Unbiased.
Could asking your parents for help be an option if you can’t pay your mortgage? A report by wealth managers Saltus in June 2023 found that 79% of parents in the UK with assets including property of £250,000 or more are supporting their adult children financially. Some one in four are helping with mortgage payments.
If you get into mortgage arrears your lender will normally write to you within 15 days of a missed payment, telling you the total sum of your arrears, list all the payments you’ve missed or partly paid, your outstanding mortgage balance and any charges incurred because of missing any payments – and indicate any charges that may become due if the arrears isn’t paid back.
But don’t wait for them to contact you, you should talk to them as soon as possible. They will give you the option to pay what you owe in full or consider letting you pay what you owe in instalments, if you cannot pay the full amount.
Your lender might let you add your arrears to the total amount you owe and pay it back over the lifetime of the mortgage. This is known as ‘capitalising your arrears’. Although you’ll pay more interest overall by doing this so it’s a good idea to get advice first. The lender may take further action to collect the debt if you fail to keep to your payment arrangement.
Bear in mind late or missed mortgage payments can have a significant impact on your credit rating. That, in turn, could impact your options for borrowing in the future whether that is remortgaging to move house, remortgaging to pay off debts or applying for any other form of borrowing. Read more with our guide to credit scores.
To get mortgage arrears help, contact your lender. The sooner you contact them, the sooner you can access help.
Missed, late or partial payments are recorded on your credit file for at least six years.
Yes, you can sell your house with mortgage arrears. If you’re worrying ‘I can’t pay my mortgage: what are my options?’ you might decide this is the best route for you. You may find downsizing or moving to a cheaper area allows you to reduce your mortgage to an affordable level.
First of all though, get a valuation to check the sale price will cover the mortgage and any mortgage debts.
If you’re not going to get enough money from the sale to cover your mortgage debt, you’ll have to negotiate with your lender because they might not be prepared to release the property for sale. Also, if you are on benefits, you should also get advice about what to do if you’re going to have a lump sum left over as this could impact what benefits you the qualify for.
However, if you are thinking about selling up make sure you read our step by step guide to selling so you understand the steps and costs involved. But if you need to move quickly, then check out our guide to quick sale companies as you may get much less then you’d hoped for your property.
According to the latest UK Finance figures, homeowner mortgages in arrears in the last quarter 2023 increased 7% on the previous quarter, taking the total figure in arrears to 93,680. This was 25% higher than the year before.
Under the Mortgage Charter, no home will be repossessed within 12 months of the first missed payment, unless there are exceptional circumstances. And your lender should only start court action to repossess your home as a last resort.
The definition of mortgage arrears is a build up of overdue payments on your mortgage.
Now it is time to go through your budget and see if there is anywhere you can make cutbacks, so you have more money available for your mortgage repayments.
There are several ways you may be able to slash your outgoings. These include:
If you’re thinking, ‘I can’t pay my mortgage: what are my options to get more money coming in?’ it’s time to see if you can boost your income.
This doesn’t have to mean asking your boss for a pay rise – although that is well worth a discussion if you haven’t had a wage increase in the last 12 months. Here are five other ways to increase how much money you have coming in each month:
No. If you simply fail to make a monthly mortgage payment you will be in arrears. If you can’t afford to make your repayment speak to your mortgage lender straightaway. They may be able to offer you a mortgage holiday or another solution that avoids you falling into arrears.
In exceptional circumstances some lenders may accept a credit card payment to cover your mortgage repayments, but most won’t. Even if your lender will accept it, you may find it makes your situation worse. Your credit card provider may view the payment as a cash advance, which would mean you are charged a high rate of interest from the minute the payment is made.
If you are eligible for Universal Credit and struggling with your mortgage payments, you may get some help. You may be able to claim a loan which you will have to repay if the property is sold or transferred into someone else’s name. You will need to have been claiming benefits for 39 weeks before you can get help with housing costs.
If you are not working, working less than 16 hours a week or are on a low income you may be able to claim government help with your mortgage interest. To do so you’ll need to be claiming certain benefits. See the section above on Support for Mortgage Interest.
HomeOwners Alliance Ltd is registered in England, company number 07861605. Information provided on HomeOwners Alliance is not intended as a recommendation or financial advice.
Mortgage service provided by London & Country Mortgages (L&C), Unit 26 (2.06), Newark Works, 2 Foundry Lane, Bath BA2 3GZ, authorised and regulated by the Financial Conduct Authority (FRN: 143002). The FCA does not regulate most Buy to Let mortgages. Your home or property may be repossessed if you do not keep up repayments on your mortgage.
HomeOwners Alliance Ltd is an Introducer Appointed Representative (IAR) of Seopa Ltd, for home insurance, authorised and regulated by the Financial Conduct Authority (FCA FRN: 313860).
HomeOwners Alliance Ltd is an Introducer Appointed Representative (IAR) of LifeSearch Limited, an Appointed Representative of LifeSearch Partners Ltd, authorised and regulated by the Financial Conduct Authority. (FRN: 656479).
Independent Financial Adviser service is provided by Unbiased, who match you to a fully regulated, independent financial adviser, with no charge to you for the referral.
Bridging Loan and specialist lending service provided by Chartwell Funding Limited, registered office 5 Badminton Court, Station Road, Yate, Bristol, BS37 5HZ, authorised and regulated by the Financial Conduct Authority (FRN: 458223). Your property may be repossessed if you do not keep up repayments on a mortgage or any debt secured on it.
