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Mortgage advice from the CML, Citizens Advice and Shelter

Wednesday, 18 February 2009 11:25 AM

Mortgage payments this year could cause problems for many, with an estimated half a million homeowners expected to fall behind with their payments.

Lenders and debt advice agencies are calling on borrowers in trouble to take early action to help themselves and prevent the worrying prospect of repossession.

The Council of Mortgage Lenders (CML), Citizens Advice and Shelter have therefore got together to offer some simple advice to help borrowers get out of trouble and stay out of trouble.

Michael Coogan, CML director general, said: "Unfortunately more borrowers are getting into financial difficulty, but the vast majority of those who face temporary problems will be able to work with their lender to find a solution. The key is to tell your lender straight away and keep paying what you can."

Shelter, the UK's housing and homeless charity, is currently offering advice on its website for anyone fearing repossession at this time.

Adam Sampson, chief executive of Shelter, said: "As the credit crunch continues to bite, the reality is that more and more homeowners will struggle to keep up with their mortgage payments this year.

"We are seeing increasing numbers of people coming to us for help with mortgage problems and we would urge anyone in difficulty not to bury their heads in the sand and to seek advice early to ensure they don't lose their homes."

David Harker, Citizens Advice chief executive, added: "From April to December 2008 Citizens Advice Bureaux in England and Wales saw a 46 per cent increase in the number of new secured loan and mortgage arrears enquiries compared to the same period in 2007.

"We would urge anyone in this position to speak to their lender and seek free, confidential, independent advice straight away.

"Even at a late stage, getting advice can help the majority of people come to a workable agreement with their mortgage lender and can make all the difference between saving or losing their home."

The three organisations offer the following advice for those struggling to make payments:

If you are in trouble

1. Don't ignore your debt problems: this will only make them bigger.

2. Don't stop paying your mortgage altogether. Continuing to pay what you can on a regular basis will help you reach an agreement with your lender. This is also an entry requirement for some of the government support schemes.

3. Don't send the keys back and walk away: you are still responsible for the debt on the property.

4. Don't enter a sale and leaseback scheme without advice: if it seems too good to be true it probably is. These schemes can be misleading and are not yet regulated.

How to get out of trouble

1. Contact your lender, the earlier the better. Your lender will work with you to try and find a repayment solution. Your lender may be able to: lengthen the mortgage term, add your arrears to the outstanding debt, switch to an interest only basis, temporarily reduce your payments, or change the method and date of payment.

2. Get free, independent debt advice: organisations like Citizens Advice, Shelter, and National Debtline can help you manage your debts, talk to your lender, and offer advice on the new government assistance schemes.

3. Check if you are eligible for assistance. Are your payments covered by an insurance policy? Are you eligible for help towards the mortgage through the benefits system? You may be eligible for one of the government assistance schemes: check with a free and impartial debt adviser.

4. Attend court: borrowers who attend possession proceedings are more likely to reach an agreement to stay in their homes. Remember, the court is independent to make sure a fair decision is reached.

How to stay out of trouble

1. Overpay if you can afford it: if you are benefiting from lower mortgage rates, you could consider overpaying each month, though it may make sense to pay off any more expensive debts first. This will improve your equity position, reduce your interest payments and can shorten the length of your mortgage. But overpaying one month doesn't mean that a payment can be missed the next.

2. Switch to a repayment mortgage: use this period of low interest rates to switch to a repayment mortgage and start to pay down your loan. Remember to check if there are any charges that may be associated with this first.

3. Prioritise your debts: if you don't pay your mortgage you risk losing your home, so pay your mortgage and utility bills before unsecured debts like your credit card.

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