How To Get Help If I Can't Pay My Mortgage
By Taylor Brown
1st August 2023

In the current economic climate, with the UK facing a cost of living crisis, high inflation, and rising interest rates, homeowners are finding themselves under increasing financial pressure. One of the most pressing concerns is: "What happens if I can't pay my mortgage?" As mortgage advisers, we're speaking to more and more clients who are being impacted by increasing mortgage costs and are struggling to keep up with their payments in these challenging times.

Amid these economic challenges, the government introduced the Mortgage Charter in June 2023. This initiative was announced by the Chancellor following a meeting with the UK's principal mortgage lenders and the Financial Conduct Authority (FCA). Designed as a measure to assist homeowners and bring clarity to as to what help is available, the Mortgage Charter outlines commitments that many mortgage lenders have agreed to uphold. This article aims to shed light on the Mortgage Charter, explaining how it can offer some relief for homeowners in financial difficulty during these turbulent economic times.

What is The Mortgage Charter?

The Mortgage Charter is essentially a series of commitments that lenders have agreed to uphold, all designed to provide support and guidance to homeowners who are struggling with their mortgage payments. Here's what the Mortgage Charter entails -

Guidance Without Impact on Credit

The Charter ensures that anyone worried about their mortgage repayments can seek help and guidance without any impact on their credit file.

Switching Deals Without Affordability Check

For customers who are up-to-date with payments, the Charter allows them to switch to a new mortgage deal at the end of their existing fixed rate deal without another affordability check.

Timely Information

The Charter commits lenders to provide timely information to help customers plan ahead should their current rate be due to end.

Tailored Support

The Charter promises tailored support for anyone struggling, with lenders deploying highly trained staff to help customers and a range of options available.

Protection from Forced Home Departure

The Charter ensures that customers will not be forced to leave their home without their consent unless in exceptional circumstances, in less than a year from their first missed payment. This does not apply to customers who own Buy to Let properties.

Early Deal Lock-In

The Charter gives customers approaching the end of a fixed rate deal the chance to lock in a new deal up to six months ahead. They will also be able to manage their new deal and request a better like for like deal with their lender right up until their new term starts, if one is available.

Flexible Payment Options

The Charter allows customers who are up-to-date with their payments to switch to interest-only payments for six months or extend their mortgage term to reduce their monthly payments. Customers have the option to revert to their original term within 6 months by contacting their lender.

Whilst some of the commitments in the chart are not new, the charter is designed to provide flexible, short-term support for homeowners who are struggling with their current mortgage repayments or are worried about how they'll meet future mortgage repayments once their existing deal ends. However, it's important to note that some measures, such as moving to interest-only payments or extending your mortgage term, will make your mortgage more expensive in the long run.

What Happens If You Can't Pay Your Mortgage?

Finding yourself unable to pay your mortgage can be a stressful experience, and it's important to understand the potential implications. If you can't pay your mortgage, you may face late payment fees, damage to your credit score, and in the worst-case scenario, the risk of losing your home.

However, the Mortgage Charter is intended to some relief for homeowners in this situation. It offers some protections such as preventing homeowners from being forced to leave their homes within a year of missing their first payment, except in exceptional circumstances. The Mortgage Charter also allows individuals to seek guidance regarding their mortgage repayments without negatively impacting their credit file. Furthermore, it provides flexible payment options, including the ability to switch to interest-only payments for six months or extend the mortgage term to reduce monthly payments.

These measures provide immediate relief and support for homeowners who are unable to meet their mortgage repayments, although they may make the mortgage more expensive in the long run.

What to Do If You Are Struggling to Pay Your Mortgage

If you're struggling with your mortgage payments and wondering how to get help with your mortgage, it's important to know that you're not alone and that there are steps you can take -

Contact Your Lender

The first step is to contact your lender as soon as you think you might have trouble with your mortgage payments. The Mortgage Charter ensures that lenders provide help and guidance to anyone worried about their mortgage repayments, without any impact on their credit file. They can provide you with information about your options and may be able to adjust your payment plan.

Seek Independent Advice

There are numerous organisations that offer free, independent advice if you find yourself struggling with money. These include Citizens Advice, Shelter, and the Money Advice Service.

Speak to a Mortgage Adviser

Consulting with a mortgage adviser for professional mortgage advice, such as at The Mortgage Stop, can provide you with personalised advice and guidance tailored to your specific circumstances. A mortgage adviser can help you understand your options and navigate the complexities of mortgage repayments.

Remember, it's important to take action as soon as possible if you're struggling with your mortgage payments. The sooner you seek help, the more options you'll have available to you.

Conclusion

In these challenging economic times, many homeowners are finding themselves under increasing financial pressure. The question, "What happens if I can't pay my mortgage?" is a common concern. However, it's important to remember that there are resources available to help.

The Mortgage Charter, introduced by the UK government, provides a series of commitments from lenders designed to support homeowners who are struggling with their mortgage payments. These include providing guidance without impacting your credit file, allowing the switch to interest-only payments or extending the mortgage term, and ensuring protection from forced home departure.

If you're struggling with your mortgage payments, don't hesitate to seek help. Contact your lender, seek independent advice, and consider speaking to a mortgage adviser at The Mortgage Stop for personalised guidance. Remember, the sooner you take action, the more options you'll have available to you.

While the Mortgage Charter is not a cure-all solution, it represents a positive step forward in providing support and guidance for homeowners in financial difficulty. It's a reminder that even in tough times, there are measures in place to help.

Your home may be repossessed if you do not keep up repayments on your mortgage. You may have to pay an early repayment charge to your existing lender if you remortgage.

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As 2024 begins in earnest, what can homeowners, sellers and prospective buyers expect in the new year? Falling house prices and uncertainty around mortgage rates made for a turbulent 2023. Will a new normal take shape in 2024? Or will changeability remain the only constant? As 2024 begins in earnest, what can homeowners, sellers and

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