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What happens if I don’t pay my mortgage?

What happens if I don’t pay my mortgage?
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In these uncertain times, it can be difficult to meet regular financial commitments. If you are struggling to stay on top of your finances and want to know what happens if you don’t pay your mortgage, this article has some answers.

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Mortgage arrears

From your lender’s point of view, you are in mortgage arrears when you miss the first payment. At this stage, your lender will typically offer you a two-week grace period before contacting you.

Thankfully, most lenders will try and find a way for you to keep your home. This is because a bank repossession followed by a sale to pay the outstanding debt takes a lot of time and effort. So most lenders view this action as a last resort.

There are a number of possible ways you could deal with mortgage arrears.

Paying off the arrears in instalments

If you have some money left over after all the bills are paid (including the mortgage) each month, the bank may suggest you use this to pay the arrears.

You will need to work out how much you can afford to pay. It’s a good idea to work out a budget before talking to the lender.

Reducing the monthly payments

The bank may allow you to reduce your monthly payments in the following ways:

  • Extending the term of your mortgage
  • Switching to an interest-only mortgage
  • Taking a repayment holiday

Capitalising your arrears

If the value of your home is higher than the outstanding balance of your mortgage, the lender might allow you to add the arrears to the mortgage and pay the total over the mortgage term.

Selling the property

If you think your situation is not going to improve, you could consider selling your home. While this is an option, you will need to make sure that:

  • The value of the property is greater than the outstanding balance of the mortgage.
  • You have somewhere else to live.
  • You have a plan of action. You will need to make sure that you have enough money to pay for the fees and charges associated with selling your home.

Possession action

This is usually what happens if you don’t pay your mortgage and you cannot agree on an arrears repayment method. In addition, you will have typically missed at least three months’ worth of mortgage payments, but this time period can vary depending on the lender.

A lender must give you two weeks’ notice before they apply to the court for a possession order. When the action starts, you will receive court papers, including a claim for possession of the property.

Prior to court attendance, it’s a good idea to seek legal advice. During the court hearing, a judge will decide on whether the lender can take possession.

Bear in mind that if you can come to an acceptable agreement with the lender at any point during the process, the possession order can be suspended.

Eviction

If the lender is granted a possession order, you will be given a date by which time you should leave your home. This is normally 28 days after the hearing.

There is no specific procedure for an eviction process, but bailiffs must act reasonably. A representative such as an estate agent will attend the eviction so that the keys can be handed over.

Take home

If you are struggling to make mortgage payments, the most beneficial step you can take is to seek help and advice sooner rather than later. Dealing with the problem as soon as it arises will give you more options.

For more information on what happens when you don’t pay your mortgage, contact the Citizen’s Advice, Shelter Legal or Step Change. Check the Money Advice Service for advice on government help if you are unable to pay your mortgage.

If you need legal advice, it’s worth checking to see whether you are eligible for legal aid. Further information is available on the gov.uk website.

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