Mortgage Payment Difficulties: Guidance notes for borrowers

Keep in touch with the Lenders

You need to contact each lender and creditor to whom you owe money, preferably in writing. 

Your letter should explain your current problems and you need to offer to make whatever payment you feel you can afford. A sample letter is included below.

Although some lenders and creditors may not accept your offer, you should still make the promised payments.  This demonstrates a responsible attitude and will do most to preserve your future credit worthiness.

In the case of unsecured loans and credit cards, ask your creditor to reduce or suspend interest charges.  They may agree if it helps to reduce the debt.

We have highlighted the debts below that are most important and need to be treated as priority. The penalty for non-payment of these debts is severe and will affect the security of your family, so these debts should always be paid first.

Priority debts

It is important that you identify your priority debts in relation to the severity of the final penalty for non-payment.

• Mortgage arrears: As the final outcome of having mortgage arrears may be that your house is repossessed by the Lender and you and your family may loose your home, concentrate on these payments first.
• Income Tax, VAT, Council Tax (Community Charge), unpaid fines and maintenance arrears: The final penalty for these debts could be that your personal possessions are taken and you could even face a prison sentence.
• Services such as water, gas and electricity: If you are in arrears with your service supplier, they may disconnect you immediately without needing permission from the court.

Borrowers who experience financial difficulty can sometimes be tempted to concentrate on the debts with smaller payments, such as credit cards, and ignore those which involve much larger payments such as their mortgage.  You should not be tempted to adopt this policy if you are in difficulty meeting your commitments and running into arrears.

Sample letter for creditors

Dear Sir

Re: (ACCOUNT NUMBER OR REFERENCE)

I am writing to advise you that I have some financial difficulty.  Having assessed my income, expenditure and liabilities, I am writing to all of my lenders and creditors asking them to accept reduced payments.

Please would you accept a payment of £xx    per week/month towards my current arrears/debt?  (In addition would you suspend any further interest charges so that my payments will start to reduce my debt*).

I look forward to hearing from you.

Yours faithfully

*Include this final sentence only for unsecured loans or credit cards.

County Court procedures

If a lender or creditor takes court action against you, it is important that you attend any hearings.  If you are worried, free advice is available from the local Citizens Advice Bureau or Law Centre.

These hearings take place in the County Court, which is not a criminal court and is there to ensure that justice is done between you and your lender or creditor.

The case will be heard by the District Judge in the presence of just you and your lender or creditor and will not attract publicity but remain private.

Copies of correspondence between you and your lender or creditor should be made available to the court, along with your Income and Expenditure statement, which should help to justify your revised payment offer.

Source: White Horse Mortgage Services

Data is provided by lovemoney.com Limited who are an appointed representative of lovemoney.com Financial Services Limited, authorised and regulated by the Financial Services Authority.

Advice is provided by MoneyQuest Mortgage Brokers Limited who are an appointed representative of Legal & General Partnership Services Limited, which is authorised and regulated by the Financial Services Authority for advising on and arranging mortgages and insurance. Lovemoney.com Limited and MoneyQuest Mortgage Brokers Limited are not part of BGL Group Limited of which BISL Limited forms part.