Mortgage Guides

Help! I’m struggling with my mortgage repayments

Interest rates may be at an historic low, but as the general cost of living rises at a rapid rate, many are finding it difficult meeting their monthly mortgage payment. If you’re struggling, what should you do?
Updated: 14/09/11

Buying a property is not only the biggest financial transaction you’ll make in your life, but it also provides the roof over your head. Keeping it there means making the mortgage repayments every month. If you don’t, the lender could start legal proceedings to repossess the property and turf you out on the street.

If, for whatever reason, you find yourself struggling to make the monthly payments on your mortgage and you really feel that you can’t afford what you’ve committed yourself to paying, the most important thing is to contact your mortgage provider as soon as possible.

Lenders have procedures for tackling payment difficulties and the sooner you let them know you’re having problems, the sooner they can help. Identifying the problem early (rather than trying to brush it under the carpet) can make it much easier and less stressful to find a suitable solution.

If you are experiencing financial difficulties, there are various options your current provider may be able to offer you. These may include:

• Extended term - You may be able to extend the term of your mortgage, i.e. increase the period of time over which you will pay back your mortgage. This will reduce your monthly repayments but it means you will be paying off your mortgage for longer and you will pay more interest overall.


• Payment holiday - Your lender may agree to let you take a payment holiday, which would basically give you a break from making repayments for a set period of time, for example three months. This could be a good short-term solution, but bear in mind that the repayments that you don’t make will be added on to your existing mortgage and thus they will increase the amount of interest you will pay overall and may also increase the time it will take to pay off your mortgage.


• Underpayments - Your lender may let you make reduced payments for a set period of time, increasing short-term affordability; however, this too would lead to you paying more interest on your mortgage overall.


• Interest-only – Switching from a repayment mortgage to an interest-only mortgage can greatly reduce your monthly repayments. This allows you to reduce your outgoings during a period of financial difficulty. However the longer you stay on an interest-only mortgage, the more interest you will pay overall.
  Furthermore, if you only have a small deposit on your house, by switching to an interest-only mortgage you could put yourself further at risk of negative equity if house prices fall. And, as you’re only paying interest and not repaying capital, you’re still left with the thorny problem of paying off the outstanding debt at the end of the mortgage term.


• New fixed-rate deal – Your lender may be able to offer you a new fixed rate mortgage with a lower rate of interest and thus lower monthly repayments.

Switching to a mortgage with a lower rate of interest is the ideal way to reduce your monthly payments, as it should not increase the amount you pay overall. In fact, getting a better deal could decrease the total amount of interest you pay.

If you are assessing mortgage deals from providers other than your own, remember that your provider may charge you an exit fee if you move your mortgage, so make sure you find out what this charge would be and include it in your calculations. You should explore all the options before making your decision.

If your lender has threatened you with legal proceedings, read our guide on repossession.

Further help

If you are struggling with mortgage difficulties, there are several organisations that can offer you free, independent advice and help you work out what you can realistically afford:

• Citizens Advice (www.citizensadvice.org.uk) offers confidential advice by phone and face-to-face. Visit the website to find your local Citizens Advice Bureau.
• National Debtline (www.nationaldebtline.co.uk) provides information and resources for coping with debt on its website as well as a helpline on 0808 808 4000.
• Consumer Credit Counselling Service (www.cccs.co.uk) offers advice, support and counselling for anyone who is worried about debt. You can call the helpline free on 0800 138 1111.