Mortgage arrears
This section contains useful information for people with mortgage
arrears or debts secured on their home.
●
Getting behind with mortgage payments
●
Contact your lender if you have problems
●
FSA rules and the Mortgage Code
●
Help towards paying your mortgage
●
Arranging to clear the arrears
●
What if I can’t afford my mortgage?
●
What if my home is not worth enough to repay the mortgage?
●
Mortgage shortfalls
●
What should I do if I have a mortgage shortfall?
●
Second mortgages or secured loans
●
What is a ‘time order’?
●
Secured overdrafts
●
What if my mortgage lender takes me to court?
●
How to stop an eviction.
Mortgage arrears are very important because you could lose
your home if you do not pay them off.They must be treated as a
priority debt.
Getting behind with mortgage payments
This section is for people with mortgage arrears.You may have
a first and second mortgage.
●
The first mortgage is the loan you took out to buy
your home.
●
The second mortgage (also known as a secured loan,
further advance, second charge or sometimes a
consolidated loan plan) is a separate loan which is secured
on your home.
Check all your loan agreements to see if they are ‘unsecured’
or ‘secured’ on your home. If they are secured loans, treat them
as priority debts because lenders can ask the court for
possession of your home if you cannot pay your monthly
instalments.The property can then be sold to pay off your debt.
The legal term for the company or building society who
gave you your mortgage is a ‘mortgagee’. In this pack we
call them ‘lenders’.
35
Mortgage arrears
Contact your lender if you have problems
It’s never too early or too late to contact your lender.You
may not be behind yet or your lender may have started court
action.Whatever the situation, do not delay in contacting your
lender. Get in touch as soon as possible by writing, phoning or
making an appointment to see them.
If the local office is unhelpful or difficult, contact their head
office and try to reach an agreement with them.
If you have not paid the mortgage for a number of months, it’s
very important that you start paying what you can, even if you
can’t afford the full monthly payment.
FSA rules and the Mortgage Code
Most lenders are now regulated by the Financial Services
Authority.The FSA rules say a lender must ‘deal fairly with
any customer who is in arrears’. The rules also need a
lender to:
●
have a written policy on how to deal with customers
in arrears;
●
set up a payment plan which is practical in terms of
your circumstances and which covers the rest of the
term of your mortgage, where appropriate;
●
send you regular information about your arrears; and
●
not put pressure on you through too many telephone
calls or letters.
If you think you are being treated unfairly by a lender, you
can complain to The Financial Ombudsman Service.The
contact details are at the pack of this pack.
More information
The FSA rules have now replaced the Mortgage
Code but you may still be able to complain to the Financial
Ombudsman Service under the Mortgage Code if your
mortgage was taken out before 31 October 2004 and your
complaint is about events that took place before this date.The
Mortgage Code included a commitment to consider all cases
of financial difficulty and mortgage arrears sympathetically and
positively. If you want more information about the Mortgage
Code, contact us for advice.
Help towards paying your mortgage
Increasing your income
You may be able to claim other benefits such as Income
Support, Pension Credit, Jobseeker’s Allowance,Working Tax
Credit and Child Tax Credit. See page 7 for information on
increasing your income. Contact your local Department
for Work and Pensions office or local advice centre for more
information or contact us.
Mortgage payment protection insurance
Check that you have claimed under any mortgage payment
protection insurance you may have.This is particularly
36
important now that you can get less help with your mortgage
payments from Income Support, Pension Credit and
Jobseeker’s Allowance. If you are turned down by the
insurance company, contact us for advice.
Mortgage rescue schemes
Some lenders offer mortgage rescue schemes.These involve
buying back your home so that you become a tenant, or
part-rent and part-buy schemes. (These are also known as
shared ownership schemes.)
Mortgage rescue schemes are rare. Contact your lender to
see if they run a scheme.You can also ask the Housing
Corporation for details of local housing associations who may
run a scheme, and ask your local council housing department.
The address for the Housing Corporation is listed on page 58.
Help from Income Support, Pension Credit and
Jobseeker’s Allowance
If you claim Income Support, Pension Credit or income-based
Jobseeker’s Allowance, the Department for Work and Pensions
will normally pay at least some of the interest on the
mortgage if you took the mortgage out to buy your home.
The following rules apply.
●
From December 2004, mortgage interest is paid at a standard
rate set by the Government and based on the Bank of
England base rate, not at the rate you actually have to pay.
If your interest rate is less than 5%, there are special rules
that may apply to you. Contact us for advice.
●
All mortgage interest payments are sent directly to your lender
by the Department for Work and Pensions (DWP), unless your
lender is not part of the scheme agreed with the DWP.
●
You can only claim interest on the first £100,000 of your
mortgage, unless the extra was taken out to adapt your
home for someone with a disability.
●
There is no help with payments towards the original
amount you borrowed (capital) on your mortgage or any
endowment policies or with any interest on arrears built up
during the waiting period of your claim (see below).
Existing borrowers
If you took your current mortgage out before 2 October
1995, you will generally have to wait eight weeks before
getting any help with mortgage interest payments when you
claim.You will then only get half of your mortgage interest
paid for the next 18 weeks (four months) of your claim.
After this, you will have your mortgage interest paid in full.
New borrowers
If you took out a new mortgage, or remortgaged, after
2 October 1995, you will generally get no help at all with
mortgage interest payments for the first 39 weeks (nine
months) of your claim.You will then have your mortgage
interest paid in full.
Special rules
If you or your partner are aged 60 or over, the Department
for Work and Pensions will pay the interest in full immediately
with no waiting time as part of your claim for Pension Credit.
●
You will be treated as an existing borrower and not have
to wait the full nine months if:
●
you don’t have to sign on because you are caring for
someone who is sick;
●
you have had a mortgage payment protection
insurance claim refused because of pre-existing illness
or HIV- or AIDS-related illness;
●
you are a prisoner on remand; or
●
you have a child living with you and you are claiming Income
Support because your partner has died or has left you and
is not providing any kind of financial support.
Other help from Income Support, Pension Credit
and Jobseeker’s Allowance
You may also claim Income Support, Pension Credit,
Jobseeker’s Allowance for the interest on the following.
●
●
A loan that was used for home repairs and improvements.
You will still have the same waiting periods (see above).
Only certain repairs and improvements count, such as
adapting your home for someone with a disability. If your
claim is turned down, you can appeal against the decision.
Contact us for advice on whether it is worth appealing.
A mortgage which is in somebody else’s name, if they are
not paying and you have to pay the mortgage to keep your
home.The Department for Work and Pensions will decide if
it is ‘reasonable’ for you to pay. If you are in this position,
contact us for advice.
●
A new mortgage with any lender for the same amount or
less than your existing mortgage as long as this is the only
remortgage since 2 October 1995.This rule applies from 28
November 2004.
●
Other housing costs such as ground rent and some
service charges.
What will Income Support, Pension Credit and
Jobseeker’s Allowance not help with?
You cannot normally claim for help for:
●
the full interest on a remortgage for more than the original
loan that was used to buy your home, unless the extra was
used for certain home improvements (see above);
●
a mortgage or secured loan if the money was used to pay
off other debts, fund a business or buy a car or holiday;
●
interest on a larger loan taken out while you are on Income
Support, Pension Credit or Jobseeker’s Allowance or within
26 weeks of coming off benefit (only the interest up to the
amount of your original loan will be covered);
●
If they decide your housing costs are too high because
your home is larger or more expensive than you need; or
the full interest on a mortgage if you have adults living with
you who are not part of your household.The Department
for Work and Pensions calls them ‘non-dependants’, and will
usually take an amount from your mortgage interest
payment depending on the circumstances and age of your
non-dependants.The non-dependant is then expected to
make up the difference. In some circumstances no
non-dependant deduction will be made (for example, if you
or your partner are blind or receive Attendance Allowance
or Disability Living Allowance because you need care).
Contact us for advice.
Warning
If you are on Income Support
If you have been on Income Support continually from before
2 October 1995, the amount of help you receive is protected.
This is called ‘add back’.This rule is complicated and the help
you receive can disappear over time. Contact us for advice.
If you have more than a 12-week break in your claim from
August 1999, you will lose your protection and your housing
costs. Any new claim for benefit will be paid under the new
rules.
What else can I do if I am on Income Support,
Pension Credit or Jobseeker’s Allowance?
If you are in arrears and your lender is threatening to take
court action, you should take the following steps.
●
Ask your lender if they will accept direct payments if they
do not already receive them.
●
Get a complete breakdown of how your housing costs have
been worked out by the Department for Work and
Pensions (DWP) if your full mortgage is not being paid.
Make sure you know how much you have to contribute for
the capital or endowment part of your mortgage.You may
also have to pay towards the interest on your mortgage if
the standard rate the DWP pay is less than your actual
interest rate.Your lender may expect you to make up the
payments from your benefit.There may be deductions being
made because of non-dependants living with you. Check
these deductions have been made correctly by contacting
your DWP office, or contact us for advice.
●
Tell your lender you are on Income Support, Pension Credit
or Jobseeker’s Allowance.
●
Most lenders are now regulated by the Financial Services
Authority.The FSA rules have replaced the Mortgage Code
but you can still complain to the Financial Ombudsman
Service under the Mortgage Code if your mortgage was
taken out before 31 October 2004 and your complaint is to
do with events before that date.
Remember
Standard-rate interest
Mortgage interest is paid at a standard rate set by the
Government, not at the rate you actually have to pay. All your
interest may not therefore be covered unless your interest
rate is less than the standard rate.
37
Mortgage arrears
If the lender takes you to court, ask the court not to make a
possession order because the DWP are paying your mortgage
interest. See What if my mortgage lender takes me to
court? on page 41. If the head office will not agree to stop
court action, contact us for advice.
Got a question?
Help with mortgage interest
If you are not sure that you are getting all the help with
the mortgage interest that you should, contact a local advice
agency or contact us. You may be able to appeal against the
decision of the Department for Work and Pensions.
already kept to a payment agreement for some months,
because this shows you are able to pay.
Changing to a repayment mortgage
If you have an endowment mortgage, you may be able to
change this to a repayment mortgage. Endowment mortgages
include an insurance policy and if you have had this policy for
a few years it may have a surrender value.The surrender value
is the amount of cash the policy is worth if you cancel it.
Ask your lender about this and get independent financial
advice on whether:
●
it is a good idea to cash in or sell your endowment
policy; and
●
changing to a repayment mortgage will reduce your
monthly payments.
Arranging to pay off the arrears
Warning
Don’t take an extra loan
Don’t be tempted to take out an extra loan to repay your
mortgage arrears. Often these are very expensive and could
put your home at greater risk. Contact us for advice
You will usually have to offer an extra monthly payment to clear
the arrears. Lenders will sometimes ask for the arrears to be
cleared over 12 to 24 months. Ask for a longer time to pay
the arrears if you cannot afford to do this. If you cannot
manage to clear the arrears within the time the lender wants,
start paying the amount you have offered anyway. Explain why
you can’t pay the amount they have asked for, particularly if
there are circumstances such as a long-term illness, birth of a
child, relationship breakdown or unemployment.
If the value of your home is far more than the total mortgage,
tell the lender.The more your house is worth, the less risk
your lender is taking. A recent court of appeal case (called
Cheltenham & Gloucester v Norgan) says in this situation a
reasonable time to pay back the arrears could be the whole
lifetime of your mortgage. If this applies to you, tell your
lender. Contact us for advice.
If your home is not worth as much as the mortgage, see the
section on page 39.
Other arrangements you could consider
Sometimes your lender may agree a different arrangement.
Some of these are set out below.
Adding the arrears to your mortgage
This is called ‘capitalising’ the arrears. Normally you can
only do this:
●
on first mortgage arrears; and
●
if the value of your property is a lot more than the total
amount of your mortgage.
It works as follows.The amount of the arrears is added to the
total mortgage.The monthly repayments are increased to take
account of this. So the arrears are spread over the years you
have left in your mortgage term.
Your lender may be more likely to agree to this if you have
38
There are also other companies in the market who will buy
insurance policies at higher rates than the insurers will pay
in surrender value. If you decide to sell and the policy is
‘assigned’ to your mortgage company, you must ask them
to release it before you can cash it in. If you cancel your
endowment policy, ask your lender about a mortgage
protection insurance policy.This would pay the mortgage
if you died.
If you do change to a repayment mortgage, you could also ask
your lender to extend the mortgage term (see below).
Warning
Get financial advice
If you are thinking of cashing in your endowment policy or
changing to a repayment mortgage, you should always get
independent financial advice.There may be a charge for the
service. For a list of independent financial advisers in your
local area contact the IFA Promotions office.The number is
listed on page 58.
Increasing the mortgage term
Most mortgages are spread over 25 years – this is called the
mortgage term. If you have already lived in your home for
several years, you could ask your lenders to extend the term
back to 25 or even 30 years.This could cut the monthly
payments so that you could afford to pay something towards
the arrears each month. If you have an endowment mortgage,
this may be more difficult. Ask your lender.
Paying off the interest only
If you have a repayment mortgage, you could ask your lender to
accept a monthly payment which covers only the interest part
of the normal monthly payment.This will probably have to be a
temporary arrangement. If you already have arrears, your lender
will expect small monthly payments off the arrears as well.
What else can I do?
You should make sure that you are getting all the help which
is available.You may be able to claim Income Support, Pension
Credit, Jobseeker’s Allowance,Working Tax Credit or Child
Tax Credit (see page 7). Contact your local Department for
Work and Pensions office for more information. Or contact
us for advice.
What if I can’t afford my mortgage?
Many people find that because their mortgage is high or their
income has fallen, they can’t pay the monthly instalments. If
you are in this situation:
●
explain the problem to your lender;
●
pay what you can afford; and
●
look for ways to increase your income.
Handing back the keys
Remember
Handing back keys
You may be thinking about handing the keys back to your
lender or selling your home. Contact us for advice. This
may not be a good idea.
If you give your home back to your lender, you will still be
charged the monthly instalments on the mortgage. If you do
not pay, your lender will add the instalments to the debt you
owe when the house is sold.They can also add extra interest
on to the arrears figure.The monthly instalments will only
stop being added when your lender sells your home.This
could take a long time.The lender will probably add solicitor’s
and estate agent’s fees and any court costs on to the bill.
Your lender will probably get a lower price for the house
than if you sold it yourself. It is harder to get a buyer for an
empty house. Empty houses are more likely to be vandalised
or damaged.
If you give up your home and ask your council to rehouse you,
they will probably say that you have made yourself ‘intentionally
(deliberately) homeless’ and refuse to offer you anywhere to
live. Contact us before you do this. See Getting rehoused
on page 56.
●
You may have relations or friends that you can live with, at
least temporarily.
Contact us before you put your home on the market. See
Getting rehoused, on page 56.
What if my home is not worth enough
to repay the mortgage?
If your home is not worth enough to repay the mortgage in
full, this is often known as having ‘negative equity’. If you have
negative equity, your options can be limited.Your lender
should consider allowing you to sell your home yourself
under the FSA Mortgages: Conduct of Business Rules.
For a fact sheet on
Negative equity,
call National Debtline on 0808 808 4000.
If you hand back the keys or your lender repossesses, they will
sell the property. If your home is not worth enough to repay
your mortgage, your lender can ask you to pay the difference.
This is usually called a ‘mortgage shortfall’ (see below).
Mortgage shortfalls
When you bought your home you may have made a one-off
payment to your lender for indemnity insurance.This is known
as a mortgage indemnity guarantee. From 31 October 2004
these are known as ‘higher lending charges’ under the FSA
rules.This means that if the lender repossesses and sells your
home for a price which does not clear your debt to them,
they can claim any loss from an insurance company.
Warning
Indemnity policies
The indemnity policy is usually insurance for your lender, not
for you.The insurance company can ask you to pay them what
they have paid out to the mortgage lender.
●
The indemnity policy may only cover the lender’s loss to a
set limit. So, if your debt is much bigger than the sale price
of your home, you may still owe something to the lender, as
well as the insurance company.
If you are thinking of selling your home, you need to think
about where you will live.
●
The lender and the insurance company often club together
and one company will chase you for the whole debt.
Can you ‘trade down’ by selling your home and buying a
smaller property?
●
Most second mortgages are not covered by an indemnity
policy. Even if you repay your first mortgage from the sale,
you may still owe something to your second lender, as well
as the insurance company.
●
The insurance company can ask you to pay them what they
have paid out to the mortgage lender.
Selling your home
●
●
If you sell your home and ask your local council to
rehouse you, they will probably say you have made yourself
intentionally homeless and so refuse to offer you anywhere
to live. See Getting rehoused on page 56.
●
Look at renting from a housing association as an option.
●
Private renting may be an option but you need to be careful
about the type of tenancy you are offered and how high the
rent is. Sometimes if you claim Housing Benefit (rent
rebate), your council can decide that your rent is too high
and restrict the amount of benefit they will pay you.
Indemnity policies often vary, so contact your lender to
find out whether you have paid for a policy and what its
terms are.
39
Mortgage arrears
What should I do if I have a
mortgage shortfall?
Warning
After six years
If the lender first contacts you over six years from the date
your house was sold, it may be too late for them to recover
the debt if they are members of the Council of Mortgage
Lenders. Before getting in touch with the lender, contact us
for advice.
You have options on how to negotiate with the lender.
You could:
● make an offer of payment; or
●
ask the lender to accept a small lump sum and write-off the
rest (this is called an offer in ‘full and final settlement’).
They could:
● reject your offer, and take you to court to set a level for
you to repay;
●
claim on their indemnity policy if they have one; or
●
ask for you to agree to a legal charge (a type of mortgage
to ‘secure’ the debt) if you have bought another home.
If you are in a rented home and have no assets (valuable
goods or savings), explain this to your lender or the insurance
company.They may decide not to take any further action.
For a fact sheet on
Mortgage shortfalls,
call National Debtline on 0808 808 4000.
Second mortgages or secured loans
You may have a second mortgage or secured loan. Even if you
are paying your first mortgage in full, if you don’t keep up with
payments on the second mortgage, you could lose your home.
Second mortgages tend to be at higher interest rates than
first mortgages and run for shorter periods, for example, five
or 10 years.This makes them expensive and also means that
the monthly payments will be higher.
●
●
If your home is worth more than your mortgage, it may be
worth asking your first lender if they could offer you a
remortgage.This means giving you one new mortgage
instead of the two you already have.This may be helpful as
the new monthly mortgage payment should be cheaper than
the two previous payments added together. Before signing
any agreement, contact us for more advice.
You may be able to claim Income Support, Pension
Credit or Jobseeker’s Allowance to cover the interest
on a second mortgage, if it was for certain home
improvements. See Help from Income Support,
Pension Credit or Jobseeker’s Allowance on
page 36. Contact us for advice.
If your second mortgage company takes you to court
see What if my mortgage lender takes me to court?
on page 41.
40
●
Some lenders charge very high interest rates or have
contracts with a higher interest rate if you miss payments.
You may be able to argue this is an unfair contract term.
Contact your trading standards department or contact us
for advice.
What is a ‘time order’?
With some secured loans you can apply to the court for a ‘time
order’.A time order is particularly useful if you have a secured
loan at a high rate of interest and large monthly instalments that
you cannot afford.The court could reduce the monthly
payments, extend the term of the loan, and even change the
interest rate. But the court can only make a time order if:
●
the amount you originally borrowed was less than £15,000.
(on agreements taken out on or after 1 May 1998, the limit
is £25,000); and
●
the lender has ‘called in’ the loan.This means they have sent
you a ‘default notice’ demanding you pay the full amount
you owe within a fixed period of time.
You can still apply for a time order after your lender has taken
court action.
Courts do not make time orders very often, but may be
more likely to help following a recent court decision.
You should get detailed advice from a local advice centre
or contact us before you apply to the court.You may need
to pay a fee to do this (see box below).
Remember
Fees to pay to the court
If you want to ask the court for a time order, you may need
to pay a fee, unless you are on Income Support, income-based
Jobseeker’s Allowance or if you receive the guarantee credit
element of Pension Credit.You don’t have to pay the fee if you
get Working Tax Credit with Child Tax Credit or if it includes
a disability element and your income is below a set amount.
There is an application form called an EX160 to fill in to ask
the court to agree for you not to pay the court fee if it will
cause you hardship or because you are on benefits.
If you can’t afford the full monthly payment on your secured
loan and think you may be able to apply for a time order,
contact us for advice.
For a fact sheet on
Time orders,
call National Debtline on 0808 808 4000.
Secured overdrafts
You may have a bank overdraft secured on your home (for
example, because you have a small business).This may have
high interest charges and no fixed monthly instalment to pay.
If the bank takes you to court, it may be difficult to suspend
a possession order to pay off the overdraft in instalments.
If you have an overdraft secured on your home, contact us
for advice.
If a bank is asking you to agree to secure an overdraft on your
home, see Debts with your bank on page 29, and contact
us for advice.
Warning
Beware of consolidation loans
Beware of advertisements in newspapers and on television
offering loans to clear all your debts (often called ‘consolidation
loans’).They are often very expensive and will put your home
at risk.
What if my mortgage lender
takes me to court?
You cannot be evicted from your home without a court order.
If you have left your home voluntarily, the lender might be able
to take over the house and sell it without going to court first.
Court procedures are the same for first and second mortgages
(secured loans), so the following advice applies to both.
●
Check the details of your lender’s claim to see if you
agree with them. Say if you think that the information is
wrong.You will be asked how much you can afford to pay
off the arrears.
●
Use your personal budget sheet to work out how much
you can afford to offer.
●
Put down an amount which you can afford, even if your
lender has already refused your offer.
●
Use the personal budget guidelines on page 10 of the pack
to fill in the financial details on the form.
●
You have a chance to explain why you got into arrears.
If you are hoping that your circumstances will improve in
the future, or you want time to be able to sell you home,
then say so in the space provided.
●
It is still worth sending back the reply form even after
14 days if it will reach the court before the hearing date.
Remember to keep a copy.
Before the hearing
These are the usual stages leading to action in the county court.
●
When you have mortgage arrears, the lender will write asking
for you to pay them. If you have not already contacted your
lender, do so now and try to reach an agreement.
●
If you don’t contact your lender to agree an arrangement to
pay the arrears, they will write again.They may refer the
matter to their solicitor who will write to you and
sometimes send a ‘calling-in notice’ or ‘default notice’.This
asks you to pay off the whole debt.
●
Contact the solicitor and try to negotiate a way to pay the
arrears. If the solicitor rejects your offer, you can insist that
they tell the lender about your offer. Or, contact the lender’s
head office directly yourself to try and reach an agreement.
Even if your lender refuses your offer, start paying the
amount you have offered anyway.
Court papers
If you have not reached an agreement, the lender will apply to
your local county court to issue a ‘possession claim’ which
will give you a date and time for a hearing in the county
court.You should have at least 28 days’ notice of the hearing
date. (This doesn’t mean you will automatically lose
your home.) Even if the court decides you cannot afford to
stay there, you will not be evicted from your home on the
date of the hearing.
A document called ‘particulars of claim’ will be sent as
well.This sets out your lender’s case for taking possession
of your home.You will also receive form N11M called a
‘defence form’ which you should fill in and return to the
court within 14 days.
Filling in the defence form
●
It is important to fill in the defence form as you can
give the court a full picture of your finances and what
you can afford to pay as well as say if you disagree with
the amount claimed.
Remember
Start paying what you have offered
It’s important to start paying the amount you have offered.
You can still negotiate with your lender or their solicitor. If
you can reach an agreement, the hearing date can be put off
(‘adjourned’) to give the agreement a chance to work.
The hearing
Remember
No eviction at the hearing
You will not be evicted from your home on the day
of the hearing.
You should go to a court hearing even if you have made an
agreement with your lender.
If you will not be able to go to the hearing because of illness
or disability, write to the court to explain your circumstances
and ask if a relative or friend can represent you. (Don’t
forget to include the case number in the letter.)
The purpose of the hearing is to decide on an arrangement
which is fair for both sides, not to find anyone guilty or
innocent.
Mortgage arrears should be dealt with in private with only
you, the lender’s representative and the district judge at the
hearing.The district judge is the person who decides your
case. Call them ‘Sir’ or ‘Madam.’
When you go to court
●
Make short notes about what you want to say at the hearing.
Take these with you and refer to them if you need to.
●
If your circumstances have changed since you filled in
the court form, work out a new personal budget sheet.
41
Mortgage arrears
Take three copies of your personal budget with you
(one for you, one for the district judge and one
for the lender’s representative).
●
If English is not your first language, you could take an
interpreter with you.
●
Don’t be afraid to approach the lender’s representative
before the hearing to see if you can come to an agreement
to present to the district judge. But don’t be pressed into
offering more than you can afford.The district judge may
agree with you and allow you to pay less than the lender’s
representative wants.
●
Answer questions clearly, calmly and fully.This will help the
district judge make their decision. Remember you have as
much right to put your case as the lender.
What you should ask for
●
If you can pay all the arrears in a short time, for instance
through a remortgage, ask for an adjournment.
●
If you don’t agree with the arrears figure, ask for an
adjournment so that the lender can provide a detailed
statement of your account.
Warning
Extra costs
Watch out for extra costs being added on for each hearing
you go to.You may be able to ask the district judge to
order that the lender pays their own costs, for example,
if their figures are wrong or they have not followed
correct procedures and your hearing has to be adjourned.
Contact us for advice.
●
If the amount of arrears is agreed, make an offer of
repayment that you can afford. But remember the district
judge will usually expect you to repay the arrears within a
‘reasonable period’ which depends on your circumstances. If
your offer of repayment will take longer than three to five
years to clear the arrears, explain to the district judge why
you cannot offer more and point out the figures shown in
your personal budget. A recent court decision (called
Cheltenham & Gloucester v. Norgan) means you may be
able to pay your arrears over a longer time, even the whole
lifetime of the mortgage. Contact us for advice.
If the court will not accept this either, the district judge can make
a possession order, which allows you a set period, usually 28 days,
before your lender can take any action. See How to stop an
eviction on this page. If this happens, you can ask the court to
give you longer than 28 days to find somewhere else to live.
What if I can’t pay the order?
If at any time you find you cannot pay the amount which the
court has ordered, you should go back to the court and ask
for the order to be changed. Use the form N244, available
from the court office.There will be a fee to pay to make this
application.You do not have to pay a fee if you are on certain
benefits. See How to stop an eviction below.You should
also contact your lender and try to make a new arrangement.
How to stop an eviction
The court will not take action to evict you unless your lender
asks it to. Contact your lender immediately if:
●
you have not kept up the payments under a suspended
possession order; or
●
the time period given on a possession order has run out.
Try to make an arrangement with your lender. If you cannot
reach an agreement, your lender can apply to the court for a
‘warrant of possession’.You should be given a ‘notice of
eviction’ by the court bailiffs giving you a date and time when
they will come to evict you. You may be able to stop this,
but you must act quickly.
If you need more time to sell, to find somewhere else to live,
or want to make a renewed offer to pay the arrears by
monthly instalments, you should apply for the warrant to be
suspended on court form N244.This is a general application
form you can get from your local county court.You should fill
in the N244 form including:
●
writing the claim number of the case;
●
writing the warrant number;
●
giving the reason you’ve not been able to pay and your new
offer (in part A on the front of the form);
If the district judge thinks your offer is reasonable, they will
probably make a ‘possession order’ but it will be suspended if
you agree to pay the normal mortgage payment plus an extra
monthly amount off the arrears. If you keep to these
payments, the lender cannot take any further action.
– in part B, ticking the box saying you rely on ‘evidence in
part C’;
If the court does not accept your offer, you could ask for an
adjournment to give you time to sell your home yourself.
Show the court proof that your home is on the market, such
as a letter from the estate agent.This may be better than
letting the lender take possession, and sell your home. But
before doing this, read Getting rehoused on page 56.
Contact us for advice.
– signing the ‘statement of truth’ at the end of the form.
Even if the district judge won’t adjourn to give you time to
sell, you can ask them to postpone the possession order for a
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longer period (for example, three months).This will give you
time to sell the house yourself.
– in part C on the back of the form, attaching your
personal budget or write it out on the form;
Do this as soon as possible to allow the court time to arrange
a hearing.
There will be a fee to pay the court, see the box on page 43.
Remember
Fee to pay
If you want to ask the court to suspend the warrant of
possession, you will need to pay a fee, unless you are on
Income Support, income-based Jobseeker’s Allowance, or if
you receive the guarantee element of Pension Credit,Working
Tax Credit with Child Tax Credit or you receive a disability
element and your income is below a set amount.There is an
application form called an EX160 to fill in to ask the court to
agree for you not to pay the court fee if it will cause you
hardship or because you are on benefits.
Warning
The court may refuse to accept an application within
48 hours of the eviction time. If the court refuses your
application because it is late, contact us for advice.
Remember
Suspending the warrant
You can apply to suspend the warrant for the following
reasons.
●
To make a new offer of payment on your arrears. Make sure
you don’t offer more than you can afford.Work out a new
personal budget, and send it with the form.
●
To ask the court to give you more time to sell.
●
To ask the court to give you more time to find somewhere
else to live.
The court will set a date for a hearing, usually before the
eviction date. You must go to this hearing or the court is
unlikely to suspend the warrant.
If any further warrants are issued, you may still be able to ask
the court to suspend them (for example, to give you time to
find somewhere else to live).
If all your efforts to stay in the property fail, you will be given
an eviction date. If you are in this position, contact us for
advice.
●
They must use the money from the sale to pay off the court
costs, estate agent’s and solicitor’s bills, the mortgage and
any second or third mortgages.
●
The lender must tell you in writing how the money has
been spent.
●
They must send you any money which is left over.
Remember to give them a new address.
Mortgages are paid off in the order you took them out. If the
sale of your home does not raise enough money to repay the
first mortgage and any other mortgages plus all the costs, you
may still owe some money to the lender. See What if my
home is not worth enough to repay the mortgage? on
page 39.Your lender could take court action against you to
collect the rest of the debt using the same court procedure as
credit debts.This is set out on page 31.
Complaints
Your lender should have their own complaints policy which
you can use if you feel that at any stage your lender has
acted unfairly. If you are not happy with the outcome of
your complaint, you can contact the Financial Ombudsman
Service.The address is on page 58 of this pack.The Financial
Ombudsman Service will look at whether your lender
has followed the FSA rules which came into force on
31 October 2004 that cover lenders.They can also look at
complaints about events that took place before that date
under the terms of the old Mortgage Code. If this applies
to you, contact us for advice.
Remember
Pay your mortgage first
You must pay your mortgage before credit debts such as bank
loans, credit cards, door-to-door collectors, or overdrafts which
are not secured on your home. If your mortgage arrears and
other priority debts use up all your money for creditors, and
there is nothing left to offer on your credit debts, tell your
creditors this and send them a copy of your personal budget.
See How to work out offers of payment on page 24.
Try to move out before the eviction date because the bailiffs
can force their way in if they have to.They do not need to
remove your furniture and possessions, which will stay locked
in the property.You will then have to get the lenders’
permission to enter the property again in the future and
arrange to remove your furniture. Some lenders try to argue
that they can keep any belongings left in the house. It is safer
to remove all that you can before the eviction date. If your
lender is refusing you permission to remove your furniture,
contact us for advice.
After you are evicted your lender will still add interest to
your mortgage account until the property is sold.
Your lender must do the following.
●
They must follow FSA rules and sell your home for the best
price that might reasonably be paid taking into account
factors such as market conditions. However, sale by lenders
is likely to produce a lower price than if you sold it yourself.
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