Q&A: What to do if you're struggling to pay your mortgage

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The Independent Online

More than 19,000 homes were repossessed during the first half of this year as homeowners struggled to meet their mortgage repayments.

Q: What should I do if I am having trouble paying my mortgage?

A: The first and most important thing to do is contact your lender as soon as possible. Lenders are required to treat borrowers in this position "sympathetically and positively".

If your problems are likely to be temporary they may be able to arrange a mortgage repayment holiday for you, adding the arrears to the mortgage. Alternatively they could switch you to an interest-only mortgage, or increase your mortgage term, both of which would reduce the amount you had to pay each month.

Many lenders also have telephone helplines and debt counselling facilities which may be able to help you.

Q: Should I continue to make some repayments?

A: Yes, it is very important that you continue to make some repayments. Even if you cannot afford the full mortgage repayment, paying what you can each month shows the lender that you are committed to solving the problem and makes it easier for them to help you.

Lenders are often happy to accept reduced payments for a short period of time until borrowers are able to resume full payments and repay any arrears.

Q: Is there anywhere I can get some free advice?

A: There are a number of organisations that offer free, independent advice. The main ones are Citizens Advice, the Consumer Credit Counselling Service and the National Debtline.

These groups can also help you if you have a lot of other debts and they can talk to your lender for you, if you do not want to approach them directly.

Q: Will I get any Government help paying my mortgage?

A: Some people may qualify for Income Support for Mortgage Interest, which pays the interest on a mortgage up to £100,000 after 39 weeks. The Government recently announced plans to step in after just 13 weeks from April and cover interest on mortgages up to £175,000.

Even though other benefits do not directly offer help with a mortgage, it is still worth seeing what you could be eligible for as the extra money many enable you to continue to make repayments.

Q: I have taken out a lot of insurance policies in the past, are any of these likely to help me?

A: If you have mortgage payment protection insurance this will cover mortgage repayments if you are unable to work due to an accident or illness or you lose your job. These policies typically cover repayments for around 12 months.

Q: House price falls mean I am now in negative equity and I cannot afford my monthly repayments, can I just hand over the keys to my lender and leave the property?

A: No, this is not a good idea. Interest will continue to build up on your debt until the property is sold, which in the current market could take some time. You will also have to pay for the cost of selling the property.

Most importantly, you will still owe any shortfall between the sale price and the outstanding mortgage debt. As a result, your lender could pursue you through the courts to get this money back.

Going down this route is also likely to make it more difficult to obtain a mortgage in future, as you could be recorded on a register of people who have had their properties repossessed.

Q: I have heard it is possible to sell your home to a company and then rent it back again, is that an option for me?

A: There has been a sharp increase in the number of sale and rent back companies operating in recent years, but people should think carefully before going down this route. The sector is currently unregulated, although the Office of Fair Trading recently called for regulation to be urgently introduced.

The companies often pay people only a fraction of what their home is worth and tenancy agreements can last for only six to 12 months in some cases. Some unscrupulous firms impose steep rent increases on people which they cannot afford.

You could also still lose your home if your new landlord does not keep up with the mortgage. If you cannot afford to pay your mortgage, you may not be able to afford the rent.

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