You could think about any of the following:
Start repaying your arrears as soon as you can
Arrears can often lead to extra charges, so will increase the amount of money you owe. Paying them off quickly may mean you have less money for a short time, but it will be cheaper in the long run.
Make extra payments
You can pay off your arrears by paying a bit more each month than your monthly mortgage payments. Just make sure you can afford the extra amount. Even if your mortgage lender doesn’t think you’re offering enough, pay the extra amount anyway. Tell them why you can only afford this much – they may not be aware of your circumstances.
Add the arrears to the mortgage
You could ask your mortgage lender to consider ‘capitalising’ your arrears. This means adding them to your total mortgage balance, spreading the arrears over the remaining period of your mortgage.Your monthly payments will increase because of this. Your mortgage lender is unlikely to agree to this if you’ve failed to stick to revised repayment arrangements in the past, or if the balance of your mortgage, including the cost of the arrears, comes to more than the house is worth.
Extend your mortgage period
Most mortgages are paid back over 25 years. If you have a repayment mortgage and you’ve been paying it back for a while, you could ask your mortgage lender to extend the remaining term to 25 years again. This will reduce your monthly payments, but you will be making them for longer – perhaps into your retirement. Also, you will be paying more for your house overall. This extension is more difficult to arrange if you have an interest only mortgage and are using an endowment policy, PEP or ISA to pay off the loan.
Ask to delay paying your arrears
If you can now manage to meet your monthly payments, but can’t afford to pay anything towards the arrears, you could ask your mortgage lender if you can delay paying arrears for a time.
For an interest-only mortgage, you can also consider:
• Taking a payment holiday
For example, if your mortgage is linked to an endowment policy and you can’t afford both sets of payments (the interest payments on the loan and the payments towards the endowment policy), you could ask the endowment policy company if you can stop paying the endowment policy for a while. You will have to arrange with them how to make up the backlog of payments
once you restart your policy.
• Cashing in or selling your endowment policy
If your endowment policy has been running for several years, it may have built up a reasonable amount that you could use to pay off your arrears. This would mean cashing in or selling the policy. If you did this, you would have to take out a repayment mortgage, or find some other way to make sure you repaid the money you borrowed. Before you cash in an endowment policy or change to a repayment mortgage, you will need to speak to your mortgage lender and the endowment company.If you cash in your policy early, the value of your policy might be considerably reduced. You should think carefully before you do this, and first ask your endowment provider how much you would get.