What happens if I miss a mortgage payment?
November 1, 2018
Missing a mortgage payment can ultimately lead to legal action and repossession by the lender, but this is generally a measure of last resort. Lenders must adhere to strict protocols before taking court action, including giving consideration to any reasonable requests that would help you manage your short-term financial difficulties.
So what might happen if you miss a payment to your mortgage?
Letter from the lender
Your lender will send a letter detailing the missed payment and requesting it be paid by a specific date. If you haven’t contacted them already, you should do so now. If you don’t get in touch and attempt to negotiate an agreement to repay the arrears, they or their solicitor will write again, or send a ‘default notice.’
You should pay what you can, even if your offer is refused, as it demonstrates your willingness to meet your financial obligations and could have a positive impact on a court hearing if one should take place in the future.
Potential solutions following a missed mortgage payment
Your lender may be willing to offer one or more of the following, but they should also give you time to consider your options as there are likely to be extra charges attached:
- Temporary interest only mortgage
If you’re currently on a repayment mortgage, a short-term interest only option may ease your financial situation and enable you to pay a sum towards the arrears alongside the new amount.
- Extended mortgage term
Your monthly repayments will be lower if your mortgage term is extended – again, this could free up money in your budget to repay your arrears over time.
- Payment holiday
This means you would pay nothing towards your mortgage for a few months.
- Mortgage Payment Protection Insurance
If you’ve been involved in an accident, suffered illness or job loss, and have Mortgage Payment Protection Insurance (MPPI), it could tide you over until you’re in a more stable financial position.
If you’ve missed more than one mortgage repayment and have been unable to agree a repayment plan, what action could the lender take?
Legal action following missed mortgage repayments
Mortgage lenders must follow the ‘mortgage pre-action protocol’ prior to taking legal action for missed payments, and are required to demonstrate this in court, but whatever the stage of legal action by the lender it’s important to continue negotiating.
If the lender decides to take court action, they’ll seek a ‘possession order.’ This could be a ‘suspended possession order’ whereby you must adhere to any agreement that you’ve successfully negotiated, or an ‘outright possession order.’
You’ll receive court papers which include a defence form. This allows you to detail your financial situation, how it’s come about, your ongoing negotiations with the lender, and how much you can pay towards your mortgage. If you dispute the amount owed, you can also state the reasons why on this form.
If the court decides in favour of the lender you can request an adjournment to give you time to sell your home, and potentially prevent repossession. If an adjournment isn’t granted, lenders generally can’t take eviction action for four weeks.
What to do if you miss a mortgage payment
It’s crucial not only to contact your lender straight away when you miss a mortgage payment, but also to seek professional advice. This is a priority debt, and as you can see, has drastic ramifications if you don’t repay.
UK Debt can help by assessing your financial situation, and clearly explaining your best options if you miss a repayment to your mortgage. Please call one of our licensed insolvency practitioners to arrange a free same-day consultation.
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