Problems paying your mortgage

Why problems arise

There can be many reasons why people struggle to pay their mortgage. For some people it’s down to a lack of planning but for others it could be a result of unexpected life events, such as problems with work, health or family. Increasingly, many older people still have mortgage debt when they retire and don’t have sufficient income to cover repayments.

Interest-only mortgages

With this type of mortgage, borrowers just repay the interest on the mortgage. Monthly repayments are lower than on capital repayment mortgages but at the end of the mortgage term you then have to pay off the full loan. You’re expected to have a plan in place to clear the debt using savings, investments or other assets.

Many older people bought these mortgages along with endowment policies, which haven’t performed as well as expected since the financial crash. They now find it difficult to pay off their mortgage at the end of their deal because they don’t have enough money set aside.

What you can do

If you’re having problems, the first thing you should do is talk to your mortgage lender. You may be able to change your mortgage terms or change the type of mortgage that you have. Although you may be more restricted in terms of what mortgages are available to you, some lenders are becoming more flexible and extending the upper age limit for borrowing. Repossession should be the last option that your lender considers.

If you have an interest-only mortgage, you’re responsible for putting in place a repayment plan. You should review it regularly and check with your lender to make sure your plan is sound. The Money Advice Service has a mortgage calculator which can help you work out what you’ll have to pay.

Check your cover if you took out mortgage protection insurance– you might be able to claim if your income has fallen because of illness, for example.

Don’t ignore the problem – it won’t go away. Citizens Advice has more information and can advise you if you’re having mortgage problems.

If you want to know about regulated financial products, you’ll need to speak to an Independent Financial Adviser (IFA). You can find one through the Society of Later Life Advisers or Unbiased.

Other options

You could consider renting out a room in your home. You may need to get permission from your lender and you must tell the Department for Work and Pensions and HM Revenue and Customs about any extra income you get. You can find more information on gov.uk.

If you have somewhere else to live, you could also consider renting out your home but you’ll have responsibilities as a landlord and your mortgage interest may increase.

You could sell your home but you’ll need permission from your lender if you have negative equity. Be aware that if you sell and then approach your local council for help with housing, they may decide that you intentionally made yourself homeless and may not have to help you.

Don’t just hand back the keys – you’ll still be liable for the debt and your mortgage lender may sell the property at a lower price.

You could consider equity release but it’s essential to get legal and financial advice before you do.

Help with costs

Make sure you’re claiming all the benefits you’re entitled to. You can use our benefits calculator to work out what you could get or call our Helpline and arrange to speak to an adviser.

You may be able to claim help with housing costs. If you’re on certain benefits, you may be able to get a Support for Mortgage Interest (SMI) loan, which can help to pay the interest on your mortgage. Contact the Money Advice Service for more information.

If you’re struggling with debt you can get help to regain control of your finances.

A story from our Helpline

Mr and Mrs Jones are in their 70s, live in Cheshire and are worried about how they’re going to pay off their interest-only mortgage when it reaches the end of its term in 2018. They told us there will be a £52,000 shortfall and they don’t know what to do to pay it. They’re worried that they’ll have to sell their home in order to service the debt but will then not be able to buy again into the same area. They like their home, it continues to meet their needs and they wish to stay in it for as long as they can. They have strong ties to their community and really want to stay put. Mrs Jones called our Helpline to find out what options they have available to them. We completed a benefit check and advised them to make a claim for Pension Credit and Council Tax Support. We also advised them to contact the National Debtline.