When experiencing Financial Difficulties and Mortgage Arrears it’s important to note what Payment Arrangements and Options are out there for you, as well as aware of what some of the Advantages and Disadvantages maybe.
Here we summarise some key implications of some of the payment options in order to assist if you’re unfortunate enough to be in the situation of experiencing financial difficulties or wish for help in clearing an arrears balance on your mortgage. Please note that lenders will always operate a qualification criterion and as such not all of their customers would be eligible for each arrangement type.
I all cases it is strongly advised that anyone unable to maintain their full contractual monthly mortgage repayment should immediately seek independent financial advice. Do you need to sort out the details of independent debt organisations?
Agreements undertaken towards a formal agreement in order to pay amounts other than that of the contractual monthly mortgage amount may be notified to the credit reference agencies used by the mortgage lender. As a result, such action may result in experiencing difficulties in obtaining credit in the future.
| Arrangement Type | Details | Advantages | Disadvantages |
|---|---|---|---|
| Standard Payment Arrangement | Agree to pay your usual monthly payment plus a percentage of your arrears for a period pf time | Clear arrears with an agreed repayment schedule | Dependent on product, increased interest charges may result due to the increase in the mortgage account balance |
| Deferred or Reduced Payment due to a temporary change in circumstance (short term) | Make payments below your usual monthly payment for a period of time | Reduced payments for an agreed period of time whilst any temporary change in circumstance is resolved | When the arrangement expires you will be in arrears and a higher monthly payment will be required to pay off your loan within the reminder of your original loan-term |
| Interest only payments on repayment loans (short term) | Make payment of only the interest on your loan for a period of time | Interest only payments for an agreed period of time | The capital not paid off during the interest only period will result in a higher monthly payment to pay off your loan within the reminder of your original loan amount. |
| Extend Term on repayment loans (long term) | The maturity date of the loan is extended | Reduced payments for the reminder of the revised loan term | Spreading payments over a longer term results in more interest paid and therefore an increased total amount repaid over the lifetime of your mortgage. |
| Capitalise the arrears | Add the arrears balance to the outstanding loan balance and spread payments over the remaining term of the loan | Returns your account to an up-to-date status | This can result in more interest paid and an increased total amount repaid over the lifetime of your mortgage. You may need to review your repayment vehicle if your mortgage is interest only to ensure any increase to your balance will be covered when maturity is reached. |
| Voluntary Sale | Should be considered as a last resort. You voluntarily agree to sell your property to avoid repossession procedures | You can stay in your property during sale process | You remain liable for mortgage payments during the sale process. You are responsible for any outstanding debt following the sale. i.e. where the proceeds of sale er insufficient to repay the total mount outstanding on your mortgage. |