What Happens If You Can No Longer Afford Your Mortgage?

Written by

Cara Bradley

5 min read

Updated: 09/07/2024

Often, our homes are so much more to us than just four walls. They’re a place to retreat to feel safe, recharge our batteries, and escape the hustle and bustle of the outside world. They’re filled with memories spent with the people who matter most: the living room, perhaps where your baby took their first steps; the garden, which you and your partner (if you have one) have poured much time and love into; and the kitchen, where you’ve hosted countless meals and celebrations for treasured friends and family over the years.

The UK mortgage market has been dominating the headlines for quite some time.
Rising property prices and interest rates have negatively impacted both would-be first-time buyers and existing homeowners alike.
Budding buyers are being forced to put their dreams on the backburner, with 52% believing that their goals are no longer achievable. As of 2024, the average age of a first-time buyer is 34 – a five year increase on 2011’s figures. In addition to this, it’s estimated to take first-time buyers approximately 11 years to save for a deposit based on the average saving rate and UK income.

Those who already own a house are facing similar financial dilemmas, as the cost-of-living crisis rages on and necessities – such as mortgage payments – become that bit harder to fund. This is even before we’ve thought about remortgaging and potential high interest rates.

The recent financial climate has left many people consumed with worry.
Falling behind and defaulting on your mortgage repayments is called being in ‘arrears.’ In December 2023, it was reported that 107,250 UK households had fallen into arrears with their mortgage provider.
If you’re struggling to afford your monthly mortgage repayments, you might be left wondering where to turn. We completely understand the pressure of the situation and appreciate just how worrying it can be. With this in mind, we’ve put together a list of things you can do that we hope will help you make the best decision for your situation and move forward with confidence.

Seek advice

Before you do anything, you may wish to seek some professional advice to establish exactly where you stand and get an idea of the options that might be available to you.

You can access free information through Citizens Advice, who can be contacted confidentially via telephone, email, and live chat. When you first visit the Citizens Advice website, be sure to select your UK country of residence so that you’re directed to the right place and can be put through to a relevant advisor.

As well as Citizens Advice, you can also find further, free financial help and support on sites such as StepChange, MoneyHelper, National Debtline, and Shelter. We have linked to each of their designated mortgage help pages.

Contact your lender

We know that reaching out and asking for help can feel daunting, but it’s the first step towards finding a solution and taking back control. Don’t wait until things get bad – contact your lender as soon as you become aware that you’re going to either make a late repayment or miss one altogether.
Money worries can make us feel ashamed, but please remember that there’s absolutely nothing to be embarrassed about. So many people are struggling at the moment – you’re not alone and you certainly won’t be judged.

Your lender should be trained to sensitively deal with a range of financial situations, and they will appreciate the fact that you’ve made contact, rather than allowing your debt to mount up. Be honest about the situation you’re facing and, if you can, try to give your lender an idea of how long you expect these circumstances to last.

Your lender will be keen to work with you to put a suitable plan in place moving forwards. Please bear in mind that every lender is different and any solution you’re offered will depend on your situation. Some possible solutions may include:

• A mortgage repayment holiday, where you’re granted temporary relief in the form of reduced or suspended repayments for a set period. Not all lenders offer this option, so you’ll need to check the terms and conditions of your mortgage agreement. Usually, to qualify for a repayment holiday, you’ll need to have overpaid your mortgage in the past, so you have built up enough credit to take a break from payments. However, if you’re struggling financially, your lender may still allow you to temporarily reduce or pause your payments; this could be at your lender’s discretion, though, and is not guaranteed. You usually won’t be able to take a repayment break if you’re in arrears with your mortgage. It's important to remember that you’ll still accrue interest on your remaining balance during a mortgage repayment holiday. MoneyHelper have put together a handy guide to mortgage repayment holidays, which you can access here.
• If you’re currently in arrears, and your house is worth more than the outstanding mortgage, you might be able to add on what you owe to the overall term of the mortgage. This is known as ‘capitalising your arrears.’ Again, contact your mortgage provider to discuss your options.
• An extension of your mortgage term could help to bring down your monthly costs. As with every financial decision, you should think very carefully about this, as you’ll end up paying more interest in the long run.
• A temporary prevention or removal of late repayment fees and charges.

You might be thinking about switching to a cheaper mortgage with lower monthly repayments. You can use comparison sites such as Compare the Market and Go Compare to give you an idea of other mortgage products on the market. Leaving your existing mortgage before the term has expired could result in a penalty so, before deciding if this the right option for you, you should compare how much you’ll be saving with the amount you will be charged to switch. Again, it could be a good idea to speak to your provider about alternative options regarding your current mortgage payments.

Good to know

If your mortgage was taken out after October 31, 2004, you will be protected by certain Financial Conduct Authority (FCA) regulations, which state the following:
“When dealing with customers in default or in arrears difficulties, a firm should pay due regard to its obligations under Principle 6 (Customers' Interests) to treat its customers fairly.”
You must be given the chance to pay your arrears and, when it comes to deciding on an appropriate repayment plan in the event of financial hardship, your lender is required to consider your requests if they’re deemed as reasonable.

What else can I do?

If your lender is unable to help and you find your situation worsening, there might be other avenues to explore.

• If you live in England or Wales and are in danger of losing your home as a result of mortgage arrears, The Housing Loss Prevention Advice Service (HLPAS) could help you obtain free legal advice and representation in court, should you need it. You can find your nearest HLPAS provider by following the link above.
• The Support for Mortgage Interest scheme (SMI) means that those claiming certain benefits might be able to get help with mortgage interest payments. This covers both standard and shared home ownership properties. SMI is a type of loan which is required to be repaid in full – with interest – once you either sell or transfer the ownership of your home. The Gov.uk website will be able to tell you more about SMI, including how to apply.
• Could a trusted family member or friend help you out? If you predict that your struggles are temporary (for example, you’ve been made redundant but expect to become financially stable again once you’re back working), could you perhaps borrow some money from family to tide you over? Loaning money from loved ones can be risky if things don’t go according to plan, so you may decide to put any agreement in writing so that everyone knows what to expect and nobody is left out of pocket.
• Another option involving family is equity release. Equity release is when a homeowner gains access to the value of their house while still being able to live in it. There are different types of equity release – you can learn more here. Those over the age of 55 who have no or very little mortgage on their property may be eligible for equity release. A parent or other family member may choose to attempt to solve a longer-term financial crisis by accessing their equity and gifting the money to you to use against your own mortgage.
  Anyone opting to proceed with equity release will need to seek advice from a professional broker trained in the procedure before they apply, as there are serious risks involved.
• Do you have a spare room going to waste? Why not think about finding a lodger? Obviously, this is a very niche resolution, and it won’t work for everyone, but it may be food for thought for some households. Welcoming a lodger to your home could increase your income and, in turn, make it easier to afford your mortgage repayments. While many mortgage lenders have no issues with borrower’s taking in lodgers, you should double-check with them first. Further information can be found here.
• You may consider the possibility of selling your house. If your outgoings are becoming too much and you’ve exhausted every possibility, you might think about biting the bullet and putting your house on the market. Before you make this difficult decision, you may wish to seek free advice from Citizens Advice. You’ll also want to ensure that you have a concrete, ongoing plan of where you’re going to stay once your house is sold; if you intend to move back in with parents, be sure to discuss this with them first so that everyone knows where they stand.

If you do decide to sell…

Enquire as to whether your lender offers Assisted Voluntary Sale (AVS). This scheme provides help to homeowners experiencing financial difficulties as they sell their property. The support offered will vary between lenders but could include a reimbursement of solicitor and estate agent fees, agreeing to reduce mortgage repayments while the property is on the market, and offering the services of an asset manager to assist with the sale.

Other things to consider

It’s likely that you have already looked into the following pointers, but we thought we’d include them, just in case. When we’re stressed, it can be easy to overlook the little things.

• Do you have mortgage protection insurance in place? Sometimes, this is taken out alongside mortgage, so it’s worth going back through your original paperwork to see if you have it. In certain cases, such as in the event of a serious illness or redundancy, mortgage protection can help with payments. Each policy is different, so make sure you read through your terms and conditions thoroughly to establish the level of assistance you could claim. You can find out more about mortgage protection insurance here.
• Check to see if you’re eligible for any benefits or discounts. For example, those in single households could be entitled to a council tax reduction. You can use the handy benefits calculator tool on the Turn2Us website to find out whether you might be eligible to receive any further help.
• Speak to your boss. Many of us find talking openly about money very uncomfortable, but sometimes taking the plunge can be worth the risk. If you’ve not received a pay rise in a while and can demonstrate reasons why you feel you should be considered for one, your boss may agree to increase your wage. You might also choose to tell your boss that your finances are currently strained – you never know, your company may well have certain procedures and benefits in place to protect staff from hardship.
• Go through your outgoings with a fine-tooth comb. With Direct Debits and automatic subscriptions, it can be easy to forget what we’re paying for each month. Set some time aside to assess exactly where your money is going and work out if there are any additional savings to be had.
• Look for additional ways to save money and increase your budget. Things like swapping branded produce for supermarket own-brands and removing all stored credit card information from your favourite shopping sites to avoid temptation are all great places to start. Remember, saving money is a marathon, not a sprint, and it really is true that every little helps.

Final thoughts

Being forced to move out of our homes can affect us in so many ways. Not only can it be hugely impactful in terms of work, schooling, and family commitments, but it can also have a negative impact on our mental health and emotional wellbeing.

We really, really hope that you never have to find yourself in this situation, but if you do end up having to sell your home, be sure to allow yourself time to grieve.
It’s not stupid or embarrassing to mourn a place that has provided you with much comfort and many wonderful memories; in fact, it’s a very natural reaction. Take your time and look after yourself. Don’t be afraid to seek support if you feel you’re not coping - there are many charities and organisations that could support you through this difficult time, including Mind. Your GP should also be able to point you in the direction of appropriate services.

Nothing anybody can say will help to reduce the sadness you might feel but, in time, we hope you can try to see this change as the beginning of a new chapter.
Whether you’re now renting, back with Mum and Dad, or you’ve moved into a cheaper property, remember that there are hundreds of happy moments yet to be discovered in your new space. It’s bound to feel strange at first, as change always does, but despite what you might think, you are strong enough to adjust to this, and you will get through it, one step at a time.