Mortgage arrears and shortfall

You may think that saying "don't stress" is easy for us; we aim to make you understand why we say that. Firstly, you have several options to tackle the situation without getting to the stage of repossession. These aren't just options like selling your property; the mortgage company needs to provide suggestions you may not know about. The Financial Conduct Authority (FCA) guidance states that the mortgage company should do everything it can to help you get back on track or come to an agreement that means you can still keep your property.

Communication is key when facing mortgage difficulties. Here are some proactive steps you can take:

Contact Your Lender Immediately

Don't ignore the problem. Your lender may offer solutions like reduced payments, payment breaks, or term extensions.

Explore Your Payment Options

Your lender might:

• Accept reduced payments temporarily
• Agree to add your arrears to your total mortgage (capitalising)
• Extend your mortgage term to lower monthly payments
• Offer a payment break while you get back on your feet
• Consider switching you to an interest-only mortgage temporarily

Understand Your Rights as a Borrower

Lenders must treat you fairly and consider all your circumstances before taking repossession action. Many lenders will wait at least three months before starting repossession proceedings.

Consider Assisted Voluntary Sale as an Alternative

If keeping your home isn't possible, some lenders offer schemes to help you sell your property voluntarily, which can be less damaging than formal repossession.

TRDG has your back with a dedicated article about "What to do if you can't pay your mortgage." It's in the purple box at the bottom of this page. This should help you get back in control and avoid repossession. If you’ve already gone past this point, i.e., your home has already been repossessed, read on.

You might think, "I could have done with this before my home was repossessed; now I have a shortfall." We hear that a lot. The great thing is that we have you covered on this as well.

Understanding the change in your debt type is essential when you have a shortfall. Your debt is no longer secured to an asset, so as you may have guessed, it is now unsecured.

Check if Your Shortfall Debt Is Statute-Barred

We don't know how long you've had this shortfall, but if it is unsecured and at least six years old, your first port of call should be to establish whether the debt or at least part of it is statute-barred. If so, you can tackle your debt with a straightforward letter.

When Is Mortgage Shortfall Debt Fully Statute-Barred?

Your total shortfall may be statute-barred if you have had it for over 12 years. Below, you will find an article in a purple box where you can determine whether your debt falls into this category.

If your debt isn't statute-barred, no stress; head to our unsecured debt section, where you will learn about options to handle the shortfall.

Different mortgage structures can affect your options when facing financial difficulty:

Repayment Mortgages

You pay both the principal and interest over time, gradually building equity in your home.

Interest-Only Mortgages

You only pay the interest during the mortgage term, with the principal due at the end.

Fixed-Rate Mortgages

Your interest rate remains the same for a specified period, providing payment stability.

Variable-Rate Mortgages

Your interest rate may fluctuate based on market conditions, potentially affecting your monthly payments.

Understanding your mortgage type can help you discuss appropriate solutions with your lender when facing difficulties.

Partial Statute-Barred Debt After 6 Years

For mortgage shortfalls (after repossession), part of your debt may become statute-barred after six years.

Full Statute-Barred Debt After 12 Years

After twelve years, the entire debt may become statute-barred.

This means creditors may lose their legal right to enforce the debt through court action. However, determining whether your debt is truly statute-barred can be complex, so read our article about Statute-Barred debt in the purple box below.

We get that your home is your security. That’s why it's essential to do everything possible to protect it. Arm yourself with knowledge; it’s your best tool for safeguarding yourself, your family, and your home.

This site isn’t just for times when you encounter financial trouble; it’s designed to help you avoid that situation altogether. This is why we encourage you to visit our Financial Education section to enhance your knowledge and shield yourself from serious financial difficulties.