If you fall behind with mortgage repayments or simply stop paying it for other reasons, there’s always a concern that your bank or mortgage lender will repossess your home. Although technically by missing one payment you will be “in arrears”, repossession won’t happen overnight. Mortgage lenders are bound by laws and regulations that are in place to ensure homeowners are treated fairly.
With that said, it’s crucial to gain a clear understanding of your situation and the potential outcome of falling behind with payments. There are undoubtedly many people who have wondered “what happens if I stop paying my mortgage?”, so it’s good to know the potential outcomes of doing so. Fortunately, we are here to help!
What Happens if I Stop Paying My Mortgage in the UK?
If a homeowner stops paying their mortgage, what happens next is mostly in the hands of the lender. They will contact you when you miss a payment, to remind you of your financial obligation and also their right to foreclose your home (although they may not include this in the initial letter). If you continue to miss payments (usually three payments), your lender will likely begin repossession proceedings. How they choose to do this, how long it takes, any additional repercussions of your failed payment and lifelines offered such as a payment plan — will vary depending on your circumstances.
Homeowners stop paying their mortgage for a wide range of reasons. Personal and financial circumstances change. Losing a job or relocating can put you in a bind. The housing market can plummet, meaning that many homeowners owe more than their property is worth.
Whatever the reason, deciding to miss a monthly payment is a decision that no one should take lightly. Foreclosure can have a severe impact on your credit, and it will make getting another home loan extremely difficult in the future.
Missing one or multiple mortgage payments doesn’t necessarily mean foreclosure is in the cards. But it’s crucial to recognise that forgoing payments will begin a process that can have long-lasting consequences for your finances and credit.
What Are Mortgage Arrears?
Technically your mortgage goes into arrears when you miss the first payment. Many lenders will offer a grace period of 15 days before they contact, as there is any number of circumstances that can make homeowners miss a payment.
Even then, after this period, repossession proceedings — known as a possession action — won’t start immediately. The majority of lenders would much prefer to find a way for you to make your payments, rather than go through the time and effort of repossessing your home, so it’s often the last resort. Therefore, most lenders won’t consider it as a solution until you have missed three months worth of mortgage payments, although some lenders may postpone even further.
Missing Payments Risks Your Home Being Repossessed
As we mentioned above, if you have already missed a mortgage payment, then your mortgage is “in arrears”. At this point, the mortgage repossession process begins with your lender.
However, if you are yet to miss a mortgage payment, it’s essential to do your utmost to pay this as soon as possible if you can. Before you miss a payment, contact your lender ASAP, as they may be able to find a solution that suits you both. If you have already missed mortgage payment(s), and not spoken to your mortgage lender yet, do so right away. Delaying merely lets the issue get worse and hinders your chance to find a quick solution.
The Government won’t help you with your mortgage payments, but you may be able to get Support for Mortgage Interest (SMI). This will cover the cost of your mortgage interest, but you’ll still have to pay the rest of the mortgage yourself. If this isn’t feasible, you may need to discuss the possibility of switching to an interest-only mortgage temporarily.
If you are eligible for SMI, the Government steps in and makes interest payments. This is for the first £200,000 of your outstanding mortgage, for the period in which you are unable to make payments. However, this is reduced to £100,000 if you receive Pension Credit.
Find out more about the repossession laws in 2020 with our helpful guide!
Selling Your Home Quickly Is a Viable Solution
If your financial situation shows no signs of improvement in the immediate future, and you run the risk of losing your home, a quick house sale is a very real and useful possibility that many people consider. A quick guaranteed sale allows you to repay any money you owe to the mortgage lender and move into a property that suits your budget, or rented accommodation if necessary. It’s a quick and straightforward process that provides you with a debt-free fresh start.
House Buyer Bureau provides the best cash offer on the market. For quick cash sales, we typically pay 80% of the market value. Here are a few example figures to give you an idea of how much you could make.