What happens if you can't pay your mortgage?

Missing a mortgage payment can instantly make you fear the worst, but one missed payment doesn't automatically mean you’ll lose your home.

Most lenders will work with you to find a solution that both parties are happy with, whether that’s adjusting your current payments or taking a mortgage break.

What happens if you can't pay your mortgage anymore?

Realising you might not be able to pay your mortgage can be worrying, but you do have options.

Whether you've already missed a mortgage payment or you're just worried about future mortgage affordability, here are some tips to consider:

Contact your lender

The first thing you should do is reach out to your mortgage lender to explain your individual circumstances and explain how much you can realistically afford to pay.

This may sound daunting, but many lenders have highly trained teams dedicated to helping customers worried about meeting their mortgage payments.

Your lender should get in touch with you within 15 days of missing a payment, but contacting them before this can reassure them that you're committed to finding a way to resolve the problem before it escalates.

Check if you have insurance

If you're struggling to pay your mortgage due to an unexpected job loss or drop in income, it's worth checking if you have Mortgage Payment Protection Insurance (MPPI).

MPPI is a policy that may be included in your original mortgage agreement that could cover your monthly mortgage payments in the event you cannot work due to illness, injury, or involuntary unemployment.

Alternatively, you may qualify for Income Protection Insurance (IPI). IPI is a long-term policy that replaces a portion of your usual income (typically 50%-70%) if you can't work due to illness or injury. It acts as a financial safety net and can be used to cover your mortgage until you recover or retire.

Switch to interest-only payments

If you're on a repayment mortgage, you may be able to switch to an interest-only mortgage to repay only the interest accrued on your mortgage.

This can reduce your monthly payments to a more affordable amount as you'll only be paying interest, instead of both interest and capital.

However, it's important to note that this should only be considered as a short-term solution, as you'll still need to repay the original loan amount in a lump sum at the end of the mortgage term.

Take a mortgage break

If you're experiencing temporary financial hardship and need relief from your mortgage payments, you might be able to get a mortgage break (also known as a mortgage holiday or a payment holiday) for a few months. This allows you to temporarily stop or reduce your mortgage payments until you get back on your feet.

If your lender agreed to a mortgage break, you’ll still be charged interest, and you'll need to make up for the missed payments through future monthly payments or by extending the mortgage term.

To qualify for a mortgage break, you must meet certain eligibility criteria.

Extend your mortgage term

If your household income has dropped, extending your mortgage term can help you spread your repayments over a longer period, reducing the amount you pay each month.

Extending your mortgage term will increase the total amount owed over the course of the arrangement (in capital and interest), so while your monthly payments will be reduced, you'll pay more overall.

Under the government’s Mortgage Charter, all homeowners have the right to switch back to their original term within six months of an extension without the need for another affordability check or credit search.

Secure a lower interest rate

If you have sufficient equity in your property, you may be able to negotiate a lower interest rate with your lender.

This can reduce the amount you pay towards your mortgage each month, making your payments more manageable going forward.

For your lender to agree to a lower interest rate, the value of your property will usually need to be more than what you still owe on your mortgage.

What is Support for Mortgage Interest (SMI)?

If you've researched your mortgage options, you may have heard of something called Support for Mortgage Interest (SMI) and wondered if it could be an option for you.

SMI is a type of government help designed to help homeowners who are on benefits continue to pay the interest payments on the mortgage and avoid repossession while on a reduced income or out of work due to a long-term illness.

It must be repaid as a lump sum with interest when you sell or transfer ownership of your home, but you can make voluntary payments of £100 or more at any time.

To qualify for SMI, you must receive Universal Credit or Pension Credit.

Will missed mortgage repayments affect my credit score?

All missed payments, late payments, and partial payments are typically reported to credit reference agencies like Experian, TransUnion, and Equifax within 30 days. They will then be added to your respective credit file for at least six years.

Negative markers on your credit file will harm your credit score, which can make it difficult to qualify for additional credit products, including a loan, credit card, phone contract, and even a bank account.

Even if you find a lender willing to give you credit, you'll likely face high interest rates, as you’ll be viewed as a high-risk borrower.

This is why it's important to take action as soon as mortgage arrears become a concern. Getting help early can allow you to put a plan in place to avoid long-term credit damage.

I'm being chased by bailiffs for mortgage debt. What should I do?

Most mortgage lenders only use enforcement officers as a last resort if the debtor fails to respond to multiple attempts to repay the debt.

Before bailiffs visit your property, they must obtain a warrant of possession from the court. They must then send you a notice of eviction at least 14 days before visiting you to give you sufficient time to seek legal advice or apply to court to suspend the warrant.

If you need more time to decide how you're going to deal with your mortgage arrears, you can apply for a government-backed scheme called Breathing Space at any point during the repossession process. If you're eligible, you'll enter a 60-day period where your mortgage lender won’t contact you, evict you, take legal action against you to make you pay, or add interest and charges to your outstanding balance.

During Breathing Space, you'll still need to pay your mortgage payments as normal, as the relief is only applied to the arrears (including any further arrears accrued during the 60-day period).

You can only apply for Breathing Space once every 12 months.

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Can my home be repossessed if I miss mortgage payments?

Repossession is always a risk if you miss mortgage payments. However, how many missed payments it takes for the repossession process to begin can vary.

The truth is, most lenders would rather avoid repossessing your home if possible, as it can be costly and time-consuming for them. As a result, they will likely reach out to you after one or two missed payments to try to find a solution before things escalate.

It's also worth remembering that a number of steps need to happen before your home can be repossessed, and this can take several months. In other words, you should have enough time to seek help and prevent the repossession process from going any further before you lose your home.

If you’re willing to find a way to deal with the mortgage arrears, it’s in your best interest to let your lender know as soon as possible. Unless the locks have been changed and your home has been seized, it’s not too late to stop the repossession process in its tracks.

How can I prevent mortgage debt?

If you're worried about affording your mortgage but you're not yet in arrears, there are still steps you can take to avoid falling into debt:

Create a budget

Working out how much you need to spend on essential bills can help you avoid any unexpected surprises.

Cutting back on your non-essential spending can make it easier to afford your mortgage payments going forward. This includes ‘wants’ or things you can live without, such as streaming subscriptions, spa treatments, gym memberships, luxury clothing, and takeaway coffee.

Reduce day-to-day spending

Reducing your daily expenditure can help you maximise your savings, freeing up more money towards your mortgage.

For example, if you usually get the bus to work, consider getting a lift with a colleague or getting off a few stops early and walking the rest of the way. Bringing lunch to work and meal-prepping can also cause you to spend less while you’re out and about.

Find ways to increase income

It can be easier said than done, but finding ways to boost the amount of money you have coming in each month can help make your mortgage payments more affordable.

From picking up extra work to selling items online, putting any additional money left over at the end of the month towards your mortgage can help you bridge the gap.

Where can I get further advice and support about mortgage arrears?

Worrying about your financial situation can have a lasting impact on your mental and physical health over time, but you don't have to suffer in silence. Whether you're struggling with mortgage arrears or you have multiple debts, help is available.

If your lender has informed you that they're applying to court, you've already received court papers in the post, or you're expecting enforcement action soon, contact your nearest Citizens Advice Bureau. They have centres across England, Scotland, Wales, and Northern Ireland, and can provide expert advice on not only how to deal with mortgage debt but also any other debts or issues you may be facing.

Alternatively, seek advice from a debt help company like UK Debt Expert. When you get in touch, a debt adviser will review the full details of your financial situation, including all your debts, and outline your available options. They can also assess your eligibility for debt solutions, such as an Individual Voluntary Arrangement (IVA), Protected Trust Deed (PTD), or bankruptcy, all of which can be used to deal with mortgage arrears.

Conclusion

For most people, their mortgage is their largest monthly expense. This makes missing payments all the more stressful, especially if you're already being visited by enforcement agents or facing legal action.

Thankfully, there are many steps you can take to make your mortgage payments more manageable and avoid falling into arrears in the first place. From contacting your lender to securing a lower interest rate, you have options.

If you're worried about mortgage debt, the key is to take action early. The sooner you reach out for support, the quicker you can find a solution and start working towards a healthier financial future.