We all try to plan ahead and be careful with our money, however sometimes things happen out of our control. If you miss a mortgage repayment, you'll find yourself in arrears. These are our top tips on what you should do if you find yourself in this tricky situation, and you can also learn how to avoid it in the first place.
1. What does it mean to be in arrears?
You’ll be in arrears if you have missed your mortgage repayments and now have payments overdue. The first thing you should always do is contact your lender. If you have Mortgage Payment Protection Insurance you can use that as it will be able to cover the whole amount of the mortgage due each month, but remember that this is really only a short-term solution. If you don’t have Mortgage Payment Protection Insurance, and you’re not able to keep making your mortgage payments, you might need to seek help from the government.
2. Will the government pay my mortgage?
The government will not pay your mortgage for you, but you can seek their help to pay the mortgage interest for you. This scheme is called the Support for Mortgage Interest. The government will step in and pay any interest payments on the first £200,000 of your mortgage from when you can’t afford them if you’re eligible for the SMI scheme. To be eligible for SMI, you need to be on a type of government income support already. However, if you have more than £16,000 in savings or own more than one property, you won’t be eligible for SMI.
3. What if the government can't help me?
If the government can't help you then you need to be aware of your repossession rights. Repossession is where the lender has the right to take your home if you can't pay the mortgage for it. Most lenders won’t repossess until it is absolutely necessary, but don’t let that lull you into a false sense of security – start taking action to avoid repossession, and try to get on the front foot and speak to your lender before you start missing payments. The best way is to seek help early and find a way to manage and prioritise your debt – at least try to pay your lender a sum of money to show good faith, even if it isn’t the whole amount, as this may help your case.
4. How can I avoid being in arrears?
To make sure you don’t get stuck in arrears and a sticky situation, create a budget from the start. Know how much you can afford to spend each month outside of your mortgage repayments and any monthly bills. If you lose your job or have an unexpected impact to your finances, you can see if you are eligible for any benefits that might help you stay afloat for the short term. But always remember, the most important thing you can do is talk to your lender. Negotiate a payment plan and make them aware of your situation up front.
5. Is it worth getting insurance?
If you're concerned about losing your job and protecting your payments if something were to happen to you, then it’s worth considering life insurance. There are so many options available, and which policy you get will depend on you. The policy will take things into account like your age, any risks you have in your life and any dependents that are living with you in your house, like your kids or a partner that isn’t working. At the moment, there’s very little support that the government can offer you so if you’re worried about your ability to make your repayments, make sure you look into a decent insurance policy to protect yourself and your family.
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