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Having a history of mortgage arrears can make it difficult to obtain a new mortgage. Mortgage arrears are one of the more serious types of missed payments and can have a major impact on your ability to obtain credit in the future.
Mortgage lenders will typically view missed mortgage payments as a sign of financial distress and it will be reflected in your credit report. This can make it difficult to obtain a new mortgage, especially if you have a history of mortgage arrears.
If you’re struggling to keep up with your monthly payments, it’s important to contact your lender as soon as possible. They may be able to offer you assistance, such as a payment holiday or a reduction in your monthly payments. It’s important to remember that missing mortgage payments can have a major impact on your credit report, so it’s important to take action as soon as possible if you’re struggling.
What is a mortgage arrear?
A mortgage arrear is when you miss a mortgage payment. As the ability to pay your mortgage is a key part of the mortgage contract, missing payments can have serious consequences.
Your mortgage lender will report any missed payments to the credit agencies, which will damage your credit score. This can make it difficult to obtain new credit in the future. In addition, your lender may begin proceedings to repossess your home if you fall too far behind on your payments.
It’s important to remember that a mortgage arrear is different from falling behind on other types of payments, such as credit card bills or utility bills. These are considered to be unsecured debts, which means that your home is not at risk if you fall behind on these payments.
There are many reasons why people may fall behind on their mortgage payments. Some common reasons include:
-Losing your job or having a decrease in income
-An increase in your payments
-Illness or injury
-Divorce or separation
-Death of a spouse or partner
Should I get mortgage protection insurance?
Mortgage protection insurance is designed to cover your mortgage payments in the event that you lose your job or are unable to work due to illness or injury.
While insurance can be a helpful safety net, it’s important to remember that it does not cover all types of job loss. In addition, many policies have strict eligibility requirements, so it’s important to read the fine print before purchasing a policy.
What are the consequences of mortgage arrears?
The consequences of mortgage arrears can be serious. Missing payments will damage your credit score, which can make it difficult to obtain new credit in the future. In addition, your mortgage lender may begin proceedings to repossess your home if you fall too far behind on your payments.
If you’re struggling to keep up with your mortgage payments, it’s important to contact your lender as soon as possible.
Will mortgage arrears affect my credit score?
Yes. Mortgage arrears will have a negative impact on your credit score. This is because mortgage lenders will report your late payments to the credit bureaus, which will then lower your credit score. If you are in arrears, you should try to make your payments on time to avoid further damage to your credit score.
It’s important to remember that your credit report is a reflection of your financial behaviour over time, so if you have a history of arrears it’s important to take steps to improve your financial behaviour. This includes making all future payments on time and working to reduce your overall debt levels.
How long can you be in mortgage arrears?
You can be in mortgage arrears for 3 months before your lender will begin repossession proceedings. This will be the last resort for the lender, who is obliged to work with you to find a solution before taking this step.
They could offer you:
- Postponing interest and/or capital repayments for a period of time
- A longer mortgage term to reduce mortgage repayments
- A different type of mortgage
- Adding the missed payments to your mortgage total for repayment later
- Help with selling your home with an assisted voluntary sale scheme
It's important that you speak to your lender at the first sign of financial difficulty for help with your mortgage. This can drastically reduce the chances of you falling into arrears.
What is a payment holiday?
A payment holiday is when you agree with your lender to stop making payments for a period of time. This can be useful if you’re struggling to keep up with your payments, but it’s important to remember that interest will continue to accrue during this time.
The key difference with a mortgage holiday is that your mortgage provider has to agree to it. If you simply stop making payments without speaking to your lender, this will be classed as mortgage arrears.
A payment holiday should only be used as a short-term measure, and you should make sure that you can afford the mortgage repayments when they resume. It’s also important to remember that a payment holiday will not reduce the overall amount you owe on your mortgage.
Can I get help with my mortgage?
You could get help with your mortgage from the government’s Support for Mortgage Interest (SMI) scheme. This scheme is available to people who receive certain benefits, and it can help with the interest payments on your mortgage.
If you’re struggling to keep up with your mortgage payments, it’s important to seek help as soon as possible. There are many organisations that can offer free debt advice and support, including:
- Citizens Advice
- The Money Advice Service
- StepChange Debt Charity
Can I get a mortgage with mortgage arrears?
Getting a mortgage with arrears is difficult, but not impossible. There are specialist lenders who may be willing to consider your application, but you will likely have to pay a higher interest rate and have a larger deposit.
If you're looking to apply for a mortgage with arrears, it's important to speak to an experienced mortgage advisor to discuss your options. They will be able to assess your individual circumstances and advise you on the best course of action.
At Echo Finance, we have a team of specialist mortgage advisors who can help you. We understand that everyone's circumstances are different, and we'll work with you to find a mortgage that meets your needs. Get in touch today to speak to one of our advisors.
Find your local adviser
Frequently Asked Questions
Below you will find the answers to the questions we hear most often from Echo Finance customers:
A mortgage broker, or a mortgage advisor, is an intermediary who acts as a conduit between an aspiring borrower and a lender. It is their job to provide the mortgage applicant with impartial advice, help them choose the right product and arrange the deal with the lender.
Brokers provide services including advice on which type of mortgage to choose, providing access to exclusive rates through their lender contacts, and application support. Some can offer advice on all areas of the mortgage market, while others specialise in niche fields such as buy-to-let, bad credit, commercial finance, first-time buyers or self-employed borrowers.
People choose to apply for their mortgage through a broker because it can boost their chances of finding the right deal, while saving time and money in the long run.
- Residential mortgages: Everything from fixed-rate to tracker mortgages for first-time buyers, homemovers and remortgage borrowers
- Specialist mortgages: For borrowers who fall outside of standard lending criteria, including people with bad credit, self-employed professionals and more
- Later-life lending: Including advice on equity release, mortgages for pensioners and retirement interest only (RIO) mortgages
- Bridging & Commercial: We have specialist advisors on hand for commercial mortgages, bridging loans, development finance and more
- Insurance & Protection: Including life, home and critical illness cover for families and individuals, as well as landlord and business protection insurance
Echo Finance is regulated by the Financial Conduct Authority and is reviewed annually by an independent compliance company. All of our brokers and advisers hold industry-standard qualifications, such as CeMAP, CeRER and DipMap, where required.
We are committed to providing advice through the channels that best suit your needs. Our brokers can provide advice via phone, email, video and web chat from anywhere in the UK, but we also aim to offer face-to-face appointments for those who request them.
