Dealing with Mortgage Debt
Getting on the property ladder and taking steps towards owning your own home is a huge financial goal for many of us. But over the last few years, thanks to the rise in mortgage interest rates and the cost of living, mortgage payments have become more of a concern for lots of people.
If you miss a payment on your mortgage or can’t keep up with your payments, you might have to deal with mortgage debt. We know how stressful dealing with debt can be, but there are solutions available to help.
In this guide, we’ll look at what mortgage debt is, what happens if you can’t pay your mortgage, some suggestions for how you can get additional help and advice, and support for Lowell customers who have mortgage debt.
This content is intended to be an impartial guide about mortgage debt. Lowell Financial Ltd does not provide financial advice. You can find out about organisations you can contact throughout the piece and on our debt help and support page.
Is a mortgage a debt?
Technically, yes, a mortgage is a debt, as you are loaning money from a lender to afford a larger purchase. But usually, most suppliers will see a mortgage as ‘good debt’. That means that lenders may see having a mortgage as a sign of sensible and responsible credit use because you’re using a high-value item (your house or property) as collateral against the loan.
Getting on the property ladder can be tough, but it’s rewarding to have your own home and a mortgage. Not to mention, owning your own home can be seen as a sign of financial stability. But what happens if you successfully get a mortgage and then struggle to keep up with your repayments?
What are mortgage arrears?
If you’re struggling to keep up with your mortgage repayments, you may have ‘mortgage arrears’ or be in arrears on your mortgage. Mortgage arrears mean that you have started to build up a debt on your mortgage agreement.
What does a missed mortgage mean?
When you sign a mortgage agreement, you’re agreeing to pay back your mortgage lender a certain amount each month. You might get into mortgage debt if you’ve missed one or more of those monthly repayments, or if you’re regularly paying less than the agreed amount each month.
It’s important to keep up with your mortgage repayments as much as you can, but if you’ve missed a repayment, don’t panic – speak to your mortgage lender to see how they can help. StepChange have a really helpful guide to mortgage arrears that can help explain a bit more about what your lender might be able to help with.
What happens if you can't pay your mortgage?
Mortgage debt is a ‘priority debt’, which means that it’s a type of debt that could have more serious consequences if you can’t clear them – you can find out more about this in our guide to clearing and paying off debt.
For example, with mortgage debts, if your mortgage arrears continue to build up and you don’t get in touch with your mortgage provider to explain why, there is the possibility that your home could be repossessed by your mortgage provider.
However, there are many steps that will be taken before that can happen, and the first thing you should do if you’re struggling to keep up with your mortgage repayments is to speak to your mortgage provider.
Speak to your mortgage provider
Your mortgage provider will be able to advise on what support they can offer you if you’re struggling with your repayments. Explain your situation – have your circumstances changed?
If you speak to them, they might be able to give you more support and time to pay back your mortgage debts. You’ll need to come to an agreement with your provider – depending on your circumstances, they might be able to offer you options like;
- Agreeing to a payment break
- Adding the debt to your mortgage total
- Extending the time on your mortgage
- Switching to an interest-only mortgage deal
Hopefully, working with your provider will give you the time and space you need to clear some of the debt.
Speaking to a debt advisor
If you’re unsure about any of these options, or if you’re not completely confident in dealing with your mortgage provider by yourself, then you can get free, independent debt support from organisations like Citizen’s Advice or StepChange.
Because mortgage debts are a priority debt, you may also want to get advice and support from a debt adviser, who can help you look at the different types of debt solutions available. They can help if you feel you’re unable to pay off your mortgage debt or can’t reach an agreement that works for you with your mortgage provider.
How can I clear my mortgage debt?
When it comes to clearing your mortgage debt, the steps are pretty similar to any other debt. However, because mortgage debts are a priority, it’s important that you start dealing with them sooner rather than later to avoid potential serious consequences, such as your property being repossessed.
Speak to your mortgage provider
As we’ve mentioned, the first step if you’ve missed a repayment or acquired mortgage debt should be getting in touch with your mortgage provider to let them know about your circumstances. They can give you advice on the kind of support they can offer.
Create a budget
Creating a budget is a great step towards clearing your debts. A budget makes sure that you know what you’re spending, so you’ll know exactly how much you can safely and reasonably pay towards clearing your debts. Our useful budget calculator tool is completely free and can help you get a view of your incomings and outgoings.
Use the debt snowball method
If you have multiple debts, then the debt snowball method focuses on clearing your smallest debts first. Bear in mind that mortgage arrears are a priority debt, though, so the snowball method may not be right for you depending on your circumstances.
How long will mortgage arrears stay on my credit history?
Missed, late, and partial repayments will show up on your credit file for six years – you can read our guide to understanding your credit file to learn more about what appears on your credit file and how it affects you.
How long can a mortgage debt be chased?
While some debts are ‘statute barred’ after a certain amount of time, this doesn’t mean that the debt no longer exists. It can still appear on your credit file and affect your credit rating.
In the UK, if you have a debt, there are laws that set rules about how long a creditor has to take action to recover a debt. This is known as the 'limitation period'.
For some debts, this period lasts for six years, often after a default notice has been issued. But depending on the type of debt and your circumstances, this can be different – make sure you read our guide to statute-barred debt, or check out National Debtline’s guidelines.
However, in some circumstances, mortgage debts may have a different limitation period. For example, if your home is repossessed while you still owe money on your mortgage, then the time limit is:
- Six years for the interest on the mortgage
- 12 years on the outstanding amount of your mortgage
If you’re not sure about anything to do with mortgage debt, speak to your mortgage provider, a debt adviser, or the company that owns your debt.
Speaking to Lowell about your debt
Whatever kind of debt you may have, getting in touch with the company that owns your debt is really important. If you ignore debt, and don’t get in touch in the hopes that it will become statute-barred, you may be risking serious consequences for your financial future and make it harder to get credit in the future.
We understand how overwhelming debt can feel – but if you’re a Lowell customer, we’re here to help. If you contact us and let us know about your circumstances, we’ll always try to find the right path forward for you.
If you’ve got a debt owned by Lowell, we really are here to help. By working with us, you can start to take steps towards clearing your debt and becoming debt free with Lowell.
What help is available if you're struggling with mortgage debt?
If you’ve got mortgage debt and you’re a Lowell customer, we’re here to help you. We genuinely want to help our customers and enable them to clear their debt with Lowell so that they can focus on new financial goals.
If you’re struggling with mortgage debt, then there are a number of options available.
How can Lowell help with mortgage debt?
If you’ve got a Lowell debt but are also finding it difficult to keep up with your mortgage payments, we can help.
Breathing space
We know that sometimes you might just need some breathing space to figure out your situation. We’ll work together to find the right solution, whether that means pausing your payments (with no interest added) or holding off on contacting you while you get back on your feet.
If you’re interested in finding out more about how this might work, you can read our guide on Statutory Breathing Space.
Reviewing your circumstances
If you’re worried about your circumstances in the longer term, then we can look at your payment plan together and see if it’s right and if it’s likely to work for you.
We want to make sure that your plan is right for you, based on your individual circumstances, and we’ll never ask you to pay more than you can afford.
Mortgage debt and mental health
We understand that having mortgage debt can be stressful. Having debt can make you feel isolated and vulnerable, especially if you feel you can’t speak to anyone about it. We’ve also previously discussed how debt can affect your mental health.
At Lowell, we really do put our customers first – so if you’re finding that the idea of having mortgage debt is affecting your mental health, then get in touch. We can put you in contact with free charities and services that can help, such as the mental health charity Mind or the Samaritans.
At Lowell, we want the best for our customers. We know that having mortgage debt can be worrying, but we’re here to help. By working with us, we can make sure you’re getting the support you need, and it’s possible to become debt-free with us.
For more information on debt-related topics and how we work with our customers, head over to our debt guidance hub.
First Published: 23rd August, 2024