Mortgage arrears - dos and don’ts

Watch a Directgov video where District Judge Stephen Gold tells you what you should and shouldn’t do if you fall behind with your mortgage repayments. Find out what you can do to make sure your home isn’t repossessed, including how to get advice.

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What should I do?

District Judge Stephen Gold: If you fail to pay your mortgage instalments, you may lose your home. That is why it is essential to treat what you should be paying to your lenders as a debt of the highest priority. But your lenders cannot have you evicted without taking you to court. “Please don’t take me to court.” That should be you to your lenders if you get behind with payments or know that this is going to happen. Contact them. They will want to know:

  • the problem
  • when it is likely to be resolved
  • how quickly you can clear the arrears

Perhaps you just don’t feel able to contact your lenders direct? Because the problem will not go way, face it and obtain some advice. You can obtain free advice which will be impartial from your local CAB (Citizen’s Advice Bureau), Shelter or National Debtline. Their phone numbers can be found in Yellow Pages and any letters you have received from your lenders about the arrears should tell you who can help.

What if I can’t reach an agreement with my lender?

District Judge Stephen Gold: But you may be able to reach an agreement with your lenders. Otherwise, arrears could lead to a court case. Then you will receive a claim form. Don’t ignore it. The claim form will give details of when the hearing is to take it place and at which county court. The form will probably say that your lenders want possession of your home – an order that you leave for good. That would enable them to sell the property and take what they are owed out of the price. And the message again is ‘don’t ignore’. You can get free and impartial advice.

Along with the claim form will be a defence form. If you are hoping to avoid a possession order, complete the defence and return it to the court. It will ask whether you want the court to consider allowing you to pay the arrears by instalments and how much you can afford to pay in addition to the current monthly instalments.

What should I do before the hearing?

District Judge Stephen Gold: Before the hearing – talk and pay.  Though a court hearing is pending, there’s nothing to stop you attempting for the first time or again to reach an agreement with the lenders. And pay what you can towards the arrears and the current instalments.

If there remains any dispute between you and your lenders when the hearing date arrives, you stay away from that hearing at your peril. At the court, there may be an advice desk with a solicitor or CAB or other adviser on hand to help you: if necessary, to even speak for you at the hearing. And you can go to any advice desk although you have not done anything about getting advice up until then. Better late than never. This help will be free.

What can the judge do?

District Judge Stephen Gold: The court usually has options about what order it should make, whether it’s a repayment or interest-only mortgage or a mixture of the two. But with a mortgage securing a bank overdraft which requires you to pay up ‘on demand’ those options will probably not apply and your position may be weaker.

Let’s look at the options.

The judge may adjourn the hearing. This is likely to be for a short period where say you have fixed up a loan from other lenders which will pay off your present lenders and it could take a couple of weeks for this to be finalised.

Or the judge may make a suspended order for possession. This is an order that requires you to leave your home by a specified date but which is then suspended – paralysed – so long as you comply with conditions about future payments which the court will spell out.

Or the judge can make an unconditional order for possession. More often than not this will require you to go by four weeks from the hearing. However, the judge has power to allow longer, for a good reason. For example, if you were able to satisfy the judge that a sale was going ahead and your lenders would get all they were owed out of the price, you might be allowed sufficient time for the sale to be completed.

With second mortgages, the judge may have broader powers including allowing reduced current payments over stipulated periods of financial difficulty.

What if my home must be sold?

District Judge Stephen Gold: You may have decided that you cannot afford to pay your mortgage and that your home must be sold. It is generally accepted that a private sale by a borrower is likely to generate a higher price than a forced sale – perhaps at public auction – by lenders who have obtained possession. Unless and until your lenders take over possession from you, it is your right to market the property for sale. Indeed, you could apply to the court to allow you to stay in the property for longer if you fixed up a sale after the court hearing at which possession had originally been ordered. The judge would look for firm evidence that the sale was going ahead. Whether you were given more time would depend on all the circumstances

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