Mortgage arrears

If you have mortgage arrears, your mortgage lender can get a court order to evict you, so that they can sell the property to pay or reduce the outstanding mortgage debt. You'll still have to pay any remaining debt. Although unusual, your lender could even make you bankrupt if you fail to cover the difference. Bankruptcy is costly and your lender may therefore be willing to accept a lesser sum from you to settle the difference rather than incur further expense.

Things you can consider doing to avoid your mortgage lender taking this action against you, are discussed below.

Cut down your monthly mortgage costs

Depending on the type of mortgage you have and the costs and charges involved, you may be able to:

• Reduce your monthly interest payments.
• Increase the period of time that the mortgage is paid. Although this would mean paying more interest in the long term it would allow you to pay smaller amounts per month.
• Suspend repayment of the amount you borrowed (the capital) and make interest-only payments.
• Find a cheaper mortgage deal with another lender. You may have to pay charges for changing your mortgage lender and you will still have to pay off any arrears. Information about switching your mortgage is available from the Money Advice Service.

Make arrangements to pay off your arrears

Get your mortgage lender's agreement to pay off your arrears on terms they find acceptable. Make sure you can afford to pay the instalments that you intend offering them. You could also consider these options:

• Paying an extra monthly amount towards the arrears, on top of your regular monthly payments;
• Have the arrears added to your capital (this is capitalising it) to be repaid over the remaining period of the mortgage.

Increase your income

Consider increasing your income in the following ways:

• Make sure that you're getting all the welfare benefits and tax credits that you're entitled to such as Income Support, Pension Credit, income-related Employment and Support Allowance, income-based Jobseeker's Allowance or Universal Credit. These benefits entitle you to an allowance. If you live in Northern Ireland, you may also be entitled to Housing Benefit to pay your Rates, or Rates Relief benefit which could free up some of your income to help address the mortgage arrears each month.
• Take in a lodger. This may have some drawbacks and you may need your mortgage lender's permission. Get advice about this.
• Move out of the property and let it. This may have some drawbacks and you'll probably need your mortgage lender's permission. Get advice about this first, and make sure you have somewhere else affordable to live.

Sell your property to pay the arrears

If you're unable to clear your arrears, the lender will begin repossession proceedings, which will eventually lead to you being evicted from your home. Your lender will ultimately sell the property and if the sale proceeds are not enough to repay the outstanding mortgage, you will usually have to pay the difference.

It would be better to sell the property yourself, rather than wait until the lender repossesses it and have a forced sale. A forced sale usually results in a much lower sale price and additional costs.

Before selling your property to pay off your mortgage arrears, you should get advice.

Handing back the keys to your mortgage lender

Leaving the property and handing the keys to your mortgage lender has no benefit, unless there is a court order to evict you. You will still be responsible for mortgage and buildings insurance payments until the property is sold and any damage to the property in your absence will be at your risk.