The Finance Blog

You only have to look on the foot of any mortgage lender or mortgage broker's website to see a written warning stated in bold that 'your home may be repossessed if you do not keep up repayments on your mortgage'. That of course is the nature of a mortgage and secured finance in general

Missing a payment on a mortgage or secured loan is a very big problem for both a borrower and lender. From a borrower's point of view if the missed payments are left to accumulate then they run the risk of having their home repossessed. From a lender's point of view, they potentially run the risk of not being able to re-coup all monies owed from the borrower if in the worst case scenario; the property is not sold for its full market value at auction after being repossessed and there is a shortfall remaining subsequently. Both parties will generally wish to avoid court action at all costs unless the situation is left to worsen to the point of no return as perceived by the lender.

In every situation where a payment is missed on a mortgage or secured loan, the best advice that any mortgage professional will give the borrower would be to contact the lender at the earliest possible stage. In some situations where the borrower is unable to work due to an accident, sickness or unemployment; a protection policy will be in place to be claimed upon to cover the mortgage payments where the individual has arranged one previously. However, where there is no such insurance policy in place then the borrower will need to make an arrangement with the lender to clear off the arrears.

By contacting the lender, they may be able to assist you in a number of different ways. These solutions may include simply setting in place a repayment plan over a set period of time in order to clear the balance of the arrears. This may be applied by simply increasing the borrower's monthly mortgage payment over a period of six months for example. This option is will tend to only be used where the borrower has the financial capability to make these increased payments. Another idea may be to switch the mortgage from Capital Repayment to an Interest only one for a temporary period of time. This may ease immediate cash flow issues for the individual however again; this solution would only be available of course to those paying their mortgage on a Capital Repayment basis.

Many mortgage products today allow for payment holidays to be taken which could also be used in these situations where money is tight. A term extension may be appropriate where the borrower is paying the mortgage on a Capital Repayment basis. The lender may even decide to capitalize the arrears into the mortgage. Any measure that is suggested will very much be worked out on a case by case basis as each borrower's situation will differ from another.

  

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