Over half a million people will fall behind with their mortgage payments this year and the worst thing they could do is ignore their problems and hope for the best.
Lenders and debt advice agencies are calling on borrowers in trouble to take early action to help themselves. And the Council of Mortgage Lenders, Citizens Advice and Shelter have some simple advice to help borrowers get out of trouble and stay out of trouble.
If your client is in trouble they should heed the following advice:
1. Don't ignore your debt problems: this will only make them bigger.
2. Don't stop paying your mortgage altogether. Continuing to pay what you can on a regular basis will help you reach an agreement with your lender. This is also an entry requirement for some of the government support schemes.
3. Don't send the keys back and walk away: you are still responsible for the debt on the property.
4. Don't enter a sale and leaseback scheme without advice: if it seems too good to be true it probably is. These schemes can be misleading and are not yet regulated.
How to get out of trouble:
1. Contact your lender, the earlier the better. Your lender will work with you to try and find a repayment solution. Your lender may be able to: lengthen the mortgage term, add your arrears to the outstanding debt, switch to an interest only basis, temporarily reduce your payments, or change the method and date of payment.
2. Get free, independent debt advice: organisations like Citizens Advice, Shelter, and National Debtline can help you manage your debts, talk to your lender, and offer advice on the new government assistance schemes.
3. Check if you are eligible for assistance. Are your payments covered by an insurance policy? Are you eligible for help towards the mortgage through the benefits system? You may be eligible for one of the government assistance schemes: check with a free and impartial debt adviser.
4. Attend court: borrowers who attend possession proceedings are more likely to reach an agreement to stay in their homes. Remember, the court is independent to make sure a fair decision is reached.
How to stay out of trouble:
1. Overpay if you can afford it: if you are benefiting from lower mortgage rates, you could consider overpaying each month, though it may make sense to pay off any more expensive debts first. This will improve your equity position, reduce your interest payments and can shorten the length of your mortgage. But overpaying one month doesn't mean that a payment can be missed the next.
2. Switch to a repayment mortgage: use this period of low interest rates to switch to a repayment mortgage and start to pay down your loan. Remember to check if there are any charges that may be associated with this first.
3. Prioritise your debts: if you don't pay your mortgage you risk losing your home, so pay your mortgage and utility bills before unsecured debts like your credit card.
Michael Coogan, CML Director General, said: "Unfortunately more borrowers are getting into financial difficulty, but the vast majority of those who face temporary problems will be able to work with their lender to find a solution. The key is to tell your lender straight away and keep paying what you can."
