What Happens if I Miss My Mortgage Payments?
If you are unable to make your mortgage payments and miss that which is due, your home loan will automatically go into default and you will be in mortgage arrears and this comes with serious ramifications, including the potential repossession of your home and subsequent eviction from the property.
Buying a property can be one of the biggest financial commitments in your entire life. It not only anchors you to a particular location for many years, but also means you will be paying usually significant sums of money every month for many years to come. Failing to make your required payments on mortgages, as with other secured loans can also potentially, irreversibly damage your credit rating and overall credit worthiness.
With any mortgage, it is important to know what to do in the event of any disruptions to payments. Understanding the best course of action to take when such disruptions occur can help you ensure the most serious of penalties like losing your home are avoided and damage mitigated at all costs.
What Happens if I Don’t Make my Mortgage Payments on Time?
If you are struggling to keep up with the repayment dates for your mortgage loan, there are various different options that can help you to stop this. The first course of action to take upon realising that you are struggling to make your mortgage repayments on time is to contact your loan provider.
If you don't make your mortgage payments on time to your lender, whether it is a first charge or a second charge mortgage, you do potentially stand to lose your property. Lenders may start repossession proceedings if payments are missed; particularly if they have not been made aware of your financial situation and inability to pay.
Contact Your Mortgage Provider Immediately
Contacting your mortgage lender as soon as you realise you are likely to miss a payment and doing so can help in many ways. Your provider may deem you eligible for a temporary reduction in your monthly payments. However, this is entirely circumstantial and will depend on other contributory factors relating to the current status of the loan and how far down the line you are with your payments.
Financing Your Mortgage
Another option available for those struggling with their mortgage payments is to finance the loan. By financing the loan, borrowers can lower their monthly repayments by extending the repayment plan. It is worth noting that when putting the loan on finance, you will very likely increase the interest rate applied to your loan repayments.
Increase Your Income
In addition to asking the lenders for help, taking on some more paid work if possible, to supplement and increase your income or perhaps letting out a room in your home to bring in some more money to go towards paying off the arrears and monthly mortgage payments.
This will entirely depend upon your own financial and personal situation and if neither option of increasing sources of income are viable, you should start to think about seeking some debt management and consolidation advice. You should also, if possible, ask friends and family to help you with the necessary repayments.
What Happens if I Can’t Make Any Mortgage Payments?
Failure to make repayments on time and failure to make repayments full stop are two completely separate situations. If you are unable to make your repayments at all, the following sequence of events are most likely to occur:
Loan default – When unable to make mortgage repayments, your loan will default and a debt collection agency, instructed by the lender will be in contact to organise the repayment for the rest of the loan.
Repossession of Property – Following the default of a home loan, your property will very likely be subject to repossession proceedings by the mortgage providers and subsequently sold on to a new buyer.
Eviction from Your Property – Along with the repossession of the home, you will also be provided with an eviction notice stating the length of time you have left to reside in the property before you are legally obliged to leave the it for good.
What Happens After I Default on My Mortgage?
Even once evicted from your home, you may still be responsible for the rest of the mortgage term’s payments as an ongoing obligation. Once your mortgage provider has sold the property, you will typically find yourself paying the difference of the what is still owed on the loan minus the price of what the property in question was resold for.
Failure to make the required payments on your mortgage and the subsequent chain of events that can arise from this, will damage your credit score and any chances of getting future credit.
The extent of this damage will depend entirely on the circumstances of these missed mortgage repayments, and the rating which you currently hold with any of the UK’s three major credit rating agencies (CRAs), Callcredit, Equifax and Experian.
Can I Get a Mortgage With Bad Credit?
Whenever you apply for credit and whenever you apply for a first or second mcharge mortgage, lenders will conduct a series of affordability and credit checks to assess your creditworthiness and to ensure you can repay the loan or financial arrangment in question.
If you have a history of missing scheduled repayments and there is a history of you not being able to meet your financial obligations with any loan or credit, this will harm your credit rating.
The worse your credit rating, the fewer lenders that will be willing to lend money to you or provide you with a mortgage. There are some lenders, for both first and second charge mortgages that may be able to take a view or even fund mortgages for people with bad credit but these will typically come at a premium and with higher interest rates to reflect the greater degree of risk the lender is taking on.
Therefore, you should always seek ways in which to improve your credit rating and avoid falling into debt and doing anything that could cause you to have bad credit which, will ultimately damage your chances of getting a mortgage of any kind in the future.
How Can I Ensure I Don't Miss My Repayments?
The most effective way to ensure that mortgage payments are made as needed and to avoid getting into such significant debt and financial trouble is to prevent these situations from occurring in the first place.
Making sure that you are in a sustainable and manageable financial position; to know with confidence that you are ready to take on such a big financial commitment is absolutely crucial before applying for a mortgage.