If you are struggling to afford your mortgage payment, it is important to deal with the situation as early as possible. A mortgage payment problem can start as a temporary financial difficulty but become more serious if payments are missed and arrears begin to accumulate.

Many homeowners and landlords worry that being unable to make one mortgage payment means repossession is inevitable. That is not normally how the process works. There can be opportunities to discuss the situation with the lender, review affordability and consider ways of dealing with the payment difficulty.

The key is not to ignore the problem.

What Should You Do If You Cannot Afford Your Mortgage Payment?

If you already know that you will not be able to make your next mortgage payment, contacting your lender promptly is usually an important first step.

You do not necessarily need to wait until the payment has been missed before speaking to the lender. Explaining the problem early may give you more opportunity to discuss your circumstances and consider possible options.

Your lender may want information about your income, expenditure, other financial commitments and the reason for the change in your circumstances.

The information you provide should be accurate. It is generally better to establish what you can realistically afford than to promise a payment that you are unlikely to maintain.

What If You Have Already Missed a Mortgage Payment?

If a payment has already been missed, the situation has moved into mortgage arrears.

Mortgage arrears simply means that the amount you were required to pay under the mortgage has not been paid in full by the required date.

A single missed payment does not necessarily mean that your property will immediately be repossessed.

However, you should not assume that a missed payment can safely be ignored.

The earlier you address the arrears, the more opportunity there may be to discuss how they can be dealt with.

Our guide How Many Mortgage Payments Can You Miss Before Repossession in the UK? explains why there is no simple rule that says a particular number of missed payments automatically results in repossession.

Why Can Mortgage Payments Become Unaffordable?

There are many reasons why someone may suddenly struggle to meet their mortgage payments.

Income may have fallen because of reduced working hours, loss of employment or a change in business circumstances. Household expenditure may also have increased because of energy bills, council tax, insurance, childcare or other essential costs.

For landlords, the problem can sometimes arise because rental income has fallen, a tenant has stopped paying rent, a property has remained vacant or unexpected repair costs have arisen.

Interest rates and changes to mortgage products can also affect monthly payments, particularly when a fixed-rate mortgage comes to an end and the borrower moves onto a different rate.

The reason for the difficulty matters because a temporary financial problem may require a different approach from a long-term affordability problem.

Tell Your Lender What You Can Actually Afford

One of the most important things to establish is what you can realistically afford.

This does not necessarily mean simply looking at your bank balance and choosing a figure.

You should consider your household or property income and your essential expenditure, together with other priority financial commitments.

If you are proposing an amount towards mortgage arrears, it should ideally be based on a realistic assessment rather than an amount chosen simply because you are worried about what the lender might say.

An arrangement that appears generous but fails after two months may not be helpful.

A sustainable arrangement may provide a better basis for dealing with the arrears over time.

Can Your Lender Help If You Cannot Afford the Payment?

Depending on your circumstances, your lender may be able to consider different forms of support or forbearance.

The appropriate option will depend on the mortgage, the nature of the financial difficulty and the lender’s assessment.

Possible approaches can include changing how or when payments are made, temporarily reducing payments, extending the mortgage term or agreeing a method for dealing with accumulated arrears.

Not every option will be suitable for every borrower, and a lender does not have to accept every proposal.

However, lenders dealing with regulated mortgages have obligations concerning customers experiencing payment difficulties.

The FCA’s mortgage rules require lenders, where appropriate, to make reasonable efforts to reach agreement with borrowers over repayment of payment shortfalls and to consider alternatives to possession. They also contemplate practical payment plans where feasible.

This does not mean that mortgage debt is cancelled or that a borrower can decide unilaterally what they will pay.

It means that the circumstances and available alternatives should be properly considered.

What If the Lender Rejects Your Proposed Payment?

Sometimes a borrower may make a proposal that the lender considers insufficient.

For example, you may believe that you can afford an additional £200 per month towards your arrears, while the lender believes that a larger amount is required.

If this happens, ask the lender to explain why the proposal has been rejected.

You can also ask what alternative arrangement the lender is proposing and provide updated financial information if your circumstances have changed.

Do not automatically agree to an amount that you know you cannot afford simply because you are worried about the possibility of repossession.

A realistic assessment of your finances can be important when negotiating with the lender.

Our article Can a Mortgage Lender Refuse to Accept a Payment Arrangement in the UK? looks specifically at what can happen when a lender rejects a proposed payment arrangement.

What If Your Financial Problem Is Temporary?

Not every mortgage affordability problem is permanent.

You may be experiencing a temporary reduction in income because of illness, a period without work, a delayed business payment, a temporary vacancy or another short-term problem.

If you expect your financial position to improve, explain this to the lender.

It can be useful to provide evidence supporting the expected change where appropriate.

For example, if your income is temporarily reduced but you have a confirmed return to work or another identifiable change in circumstances, that may form part of the information you provide when discussing your mortgage.

The important thing is to be realistic about how long the difficulty is expected to last.

What If You Cannot Afford the Mortgage Long Term?

A longer-term affordability problem may require a different approach.

If your income has permanently reduced or your monthly mortgage payment is no longer sustainable, simply trying to catch up with arrears may not solve the underlying problem.

You may need to consider whether the mortgage can be restructured, whether another mortgage product is available, whether the property remains affordable or whether selling the property is a realistic option.

The appropriate decision will depend on your individual circumstances.

If you are considering remortgaging, it is also important to understand how existing arrears and missed payments can affect your options. Our article Can You Remortgage With Mortgage Arrears in the UK? examines this issue in more detail.

What If You Are Considering Selling the Property?

Selling a property can sometimes be considered where the mortgage is no longer affordable.

However, selling does not automatically remove the mortgage debt.

The mortgage lender will normally require its mortgage to be redeemed from the sale proceeds. If the property is worth enough to cover the mortgage balance, arrears and relevant costs, a sale may provide a route towards resolving the mortgage problem.

But if the property is worth less than the amount owed, there may be a shortfall.

This is particularly important where the property has little equity or is in negative equity.

Our article What Happens to Mortgage Arrears When You Sell Your Property in the UK? explains how arrears, the mortgage redemption figure, equity and potential shortfalls can affect a property sale.

What Happens If You Ignore the Mortgage Problem?

Ignoring mortgage payments does not make the debt disappear.

If arrears continue to increase, the lender may take further steps to recover the money.

The situation can eventually progress towards possession proceedings.

This is why communication is important.

If you receive letters from your lender or its representatives, read them carefully and keep copies. If the lender asks for financial information, provide it where appropriate.

If you have received formal court documents, the position becomes more urgent and you should understand exactly what stage the matter has reached.

What Happens Before Repossession?

Repossession is not normally the first step taken simply because a borrower has missed a payment.

There can be a progression from missed payments and arrears through lender communications, attempts to agree a solution and, where the situation cannot be resolved, potential court proceedings.

The precise process and timing can vary according to the circumstances.

Our detailed guide Mortgage Repossession Process in the UK: What Happens From Start to Finish explains the broader process and the stages that can arise.

Understanding where you are in that process can be important.

Keep Records of Your Communications

When dealing with mortgage affordability problems, keep a clear record of your communications with the lender.

Save letters and emails. If you speak to the lender by telephone, make a note of the date, the department you contacted, the name or reference of the person you spoke with and what was discussed.

If you make a payment proposal, keep a copy of it.

If the lender rejects the proposal, keep the response.

If you later agree an arrangement, keep confirmation of the terms, including the amount to be paid and the date payments are due.

Good record-keeping can make it much easier to understand what has happened if the situation later becomes disputed.

Do Not Promise More Than You Can Afford

When people are frightened about losing their property, they can sometimes agree to payments that are simply unaffordable.

That can create another missed payment later.

Before agreeing to an arrangement, make sure you understand the effect of the proposed payment on your wider finances.

The objective should be to establish a sustainable way forward rather than simply postponing the problem for a few weeks.

What If You Are Already in Serious Arrears?

If your mortgage arrears have become substantial, the situation may require more detailed consideration.

You may need to establish the exact amount outstanding, the amount of arrears, any charges that have been added and whether court proceedings have started.

You should also consider the value of the property and the level of equity, particularly if selling or refinancing may eventually become relevant.

Do not assume that there is only one possible solution.

At the same time, do not assume that the lender must accept any proposal you make.

The practical options depend on the facts of the particular case.

Can You Avoid Repossession If You Cannot Afford Your Mortgage?

There is no guarantee that repossession can always be avoided.

However, identifying the problem early can give you more opportunity to consider possible solutions.

The important thing is to establish what has caused the financial difficulty, what you can realistically afford and whether the position is temporary or permanent.

If an arrangement is possible, it should ideally be sustainable.

If an arrangement is not realistic, other options may need to be considered.

The earlier the situation is addressed, the more information you are likely to have available when making those decisions.

Final Thoughts

If you cannot afford your mortgage payment in the UK, do not simply ignore the problem.

Contacting your lender early, understanding your financial position and establishing what you can realistically afford may help you explore the available options before the situation becomes more serious.

If you have already missed payments, the issue becomes one of mortgage arrears. If the arrears continue to increase, the lender may eventually take further steps, potentially including possession proceedings.

There is no single solution that applies to every borrower. A temporary financial difficulty, long-term affordability problem, significant arrears and a property with negative equity can all require different approaches.

The important thing is to understand your position and deal with the problem rather than allowing it to develop without action.

Immediate Bank Claims provides independent support, guidance and assistance relating to mortgage arrears, property repossession, LPA receivers, debt matters and related property issues.

Disclaimer

Immediate Bank Claims is not a firm of solicitors or barristers. We provide independent support, guidance and assistance relating to mortgage arrears, property repossession, LPA receivers, debt matters and related property issues.

The information provided in this article is for general information purposes only and should not be treated as legal, financial or professional advice. Every situation is different, and the application of laws, regulations and procedures will depend on the individual circumstances of each case.

If you are experiencing mortgage arrears, facing repossession proceedings or dealing with a dispute with your lender, you should consider obtaining appropriate independent professional advice regarding your specific circumstances.

This article was correct at the time of publication but should not be relied upon as a substitute for advice on your individual situation.