Arrears on a repayment mortgage

If you have arrears on a repayment mortgage, read the options below to stop your arrears from rising and to avoid any action being taken against you.

Take a look at our booklet ‘How to cope with mortgage arrears‘ for more ideas.

CORONAVIRUS UPDATE

If your income is affected by coronavirus and you are worried about paying your mortgage, speak to your lender as soon as possible.

Mortgage lenders are currently allowing borrowers to apply for a 3 month payment holiday. You can ask for this at any time until at least 31 October. Be aware that this option may mean your monthly mortgage payment goes up after the payment holiday ends. For more information on how to apply, see the Money Advice Service guide.

If you have already had a mortgage payment holiday due to coronavirus, and the 3 months is now coming to an end, your lender should be in touch with you to talk about how you can start up payments again. If you still think you are going to have payment difficulties because of coronavirus, your lender may offer to extend the payment holiday by a further 3 months. Lenders are being encouraged to treat their customers fairly in this situation.

Many lenders have also announced extra help for borrowers including :

not adding fees for late payments
switching to a lower interest rate.

Click here to find out what support your lender is giving.

Check if you have insurance that will cover your mortgage payments instead. For example, mortgage payment protection insurance or through your bank account.

Reducing capital repayments

If your difficulties are short-term, your lender may agree to allow you to pay only the interest on your mortgage for a few months. This option is most useful when your mortgage is close to being paid off and your monthly payments are mainly made up of capital. You will have to catch up on the unpaid capital later, so you need a realistic plan for future payments.

Some lenders will refuse to allow you to pay interest only if your mortgage is already in arrears. If this happens, get advice. An adviser may be able to help you negotiate with your lender to reduce (rather than stop) your capital repayments to make them more affordable.

You may also be able to persuade your lender to accept reduced interest payments as well as stopping your capital repayments for a limited period. They will normally only do this if:

you are trying to sell your home, or
your problems are short term and you’ll be able to meet the full repayments soon.

Extending the mortgage term

You might be able to negotiate with your lender to extend the number of years left on your mortgage (the ‘term’). This will give you a longer period of time to pay back your loan, so your monthly payments will be smaller. The likelihood of your lender agreeing to do this usually depends on:

how large your arrears are
your age and expected retirement date
whether you have a permanent job
how much longer your current mortgage has to run (many lenders will not extend a mortgage beyond 25-30 years).

If you decide on this option, you can ask your lender to reduce your mortgage term again when your financial situation improves or interest rates fall.

Adding the arrears to your mortgage

It may be possible to add any arrears you have to the rest of your mortgage (‘capitalise the arrears’). It will mean that you can pay off any payments you have missed over the rest of the mortgage term. You will probably have to make higher monthly payments, unless you are also able to extend the term of your mortgage (see above).

You can normally only add your arrears to the rest of your mortgage when your financial situation improves. Most lenders will usually expect you to meet your regular mortgage repayments for at least six months before they will agree to it.

Getting help and advice

Negotiating with your lender can be complicated.

Contact Shelter Cymru for further advice and help – send us an email, ring our helpline or search online for an adviser near you.

Alternatively there are lots of other organisations who might be able to help, such as Citizens Advice or the Money Advice Service. Many have specialist advisers who can help you work out your options and/or negotiate with your lender.

Other pages in mortgages

Repayment options
Joint mortgages
Mortgage protection
Changing mortgages
Endowment shortfalls
Catching up with your endowment shortfall
Endowment complaints
Dealing with mortgage arrears
Arrears on a repayment mortgage
Increasing income
Selling voluntarily
Mortgage rescue schemes
Private sale and rent back schemes
Support for mortgage interest payments

See all advice topics

Phone an adviser

If you have a housing problem, call our expert housing advice helpline
08000 495 495

Email an adviser

If you have a non-urgent problem and would like to speak to an adviser
email us

We are sorry that we cannot provide this information in Welsh, however if you would like to speak to an adviser in Welsh please contact 08000 495 495.

This page was last updated on: September 22, 2020

Shelter Cymru acknowledges the support of Shelter in allowing us to adapt their content. The information contained on this site is updated and maintained by Shelter Cymru and only gives general guidance on the law in Wales. It should not be regarded or relied upon as a complete or authoritative statement of the law.

Coronavirus (COVID-19)