If you are running into difficulty with your mortgage payments, don't leave it so late to face up to financial difficulties that you run this risk of repossession. Here's how to get out of trouble.
By Caroline Bloor
New research from the Financial Services Authority (FSA) reveals that one in five mortgage holders are concerned about meeting their repayments in the next 12 months. But a quarter said they had no plans in place for dealing with the issue. The Council of Mortgage Lenders (CML) estimates that 45,000 homes will be repossessed this year (2008) as the economic slowdown continues. Those most vulnerable are first time buyers, those with 100 per cent or sub-prime mortgages, and the million or so coming off fixed-rate mortgages.
It's worth remembering that problems are easier to resolve if they are tackled at an early stage. Most mortgage payment crises don't end with the owner losing their home because the lender or the court often comes to an arrangement with the borrower to pay off the arrears.
So, what are your options?
If your financial problems are only short-term, consider asking your mortgage lender to reduce your monthly payments for a limited time to give you a breathing space. If they're likely to be long term, you may need to consider re-mortgaging over a longer period or selling the property and moving to one that is cheaper to buy and run.
Explore ways you can increase your income to help you deal with your debts. Check you are getting any benefits and tax credits you're eligible for (visit (visit www.entitledto.com); claim on any mortgage protection insurance you may have (contact your mortgage company); think about renting out a spare room to a lodger (www.hmrc.gov.uk); do overtime; or get a weekend job. (Government help towards mortgage payments is available for some homeowners depending on circumstances but it only kicks in after nine months of unemployment).
You'll need to work out what regular payment (however small) you can afford to make to your lender (to cover both the arrears and on-going mortgage costs). There are several free debt advice agencies (see below) that can help you prepare a debt repayment plan (outlining all your income, expenditure and any spare money), work out what you can afford to pay your creditors and negotiate on your behalf.
Once you've drawn up a debt plan, write to your mortgage lender as soon as possible to negotiate an affordable repayment arrangement. You'll need to include a copy of your financial statement showing how you have arrived at the amount you are offering.
Lenders have different policies towards customers who fall into arrears; some are more understanding than others. Be proactive and accommodating. 'The way you deal with your mortgage lender will influence the judge should you come to court to fight a repossession of your home,' says Phillip Inman author of the Which? Managing Your Debt guide (£10.99 from Which?).
Tip: Get hold of the FSA's new Stay In Control Of Your Mortgage checklist from Money Made Clear or ring 0845 606 1234.
Even if the lender refuses your offer, the fact you've made one is a sign that you want to be helpful. If you are not happy with the way your lender deals with your case, you can complain, firstly via the lender's own complaints procedure then to the Financial Ombudsman Service or ring 0845 080 1800.