Brendan Burgess
Founder
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This is going to become a more common problem again now with interest rates increasing, so here are some ideas
1) You are not going to lose your home.
The usual suspects will be out talking about tsunamis of repossessions. There won't be any tsunamis. There probably won't even be a wave. The tiny number of people who bury their heads in the sand, pay nothing and who don't engage with their lender or the courts, are at some small risk. But the vast majority of people who engage with their lender and who pay what they can, have nothing to worry about.
Over 100,000 mortgages were in arrears during the last crisis. Most of these were restructured and very few people lost their homes.
Despite the public perception, the lender does not want to repossess your home. Your mortgage is a source of profit for them and they want it to continue. They will work with you to restructure it if you work with them.
1A) You are not going to lose your tracker or your low fixed rate. You are not going to be penalised for going into arrears.
The Code of Conduct on Mortgage Arrears does not allow lenders to charge you additional interest because you are in arrears. Nor can the lender withdraw your cheap tracker or finish your fixed rate early.
So there is no reason not to engage with your lender.
1B) Take action immediately - don't put it off.
Don't put it off in the hope that something will turn up or that it will sort itself out. The sooner you face up to the issue, the easier it is to sort out.
1C) While you won't lose your home, don't use that as an excuse to do nothing
2) Do a review of your overall finances. Get the wisdom of the crowd by starting a Money Makeover thread.
2A) You need to take a strategic review
In the vast majority of cases, if you address the problem early and if you cut back a bit on your expenditure, and if you extend the term of your mortgage, you will be able to get back on track. But you may need a more dramatic solution such as a Personal Insolvency Arrangement or a Debt Settlement Arrangement.
And much of this depends on your age. At a certain age (50?) your pension could come into play.
3) Talk to your lender as soon as possible, ideally before you go into arrears. The Central Bank has a very formal Mortgage Arrears Resolution Process which the lenders must implement when borrowers approach them to say that they might go into arrears.
4) Check to see if your lender has a lower mortgage rate. There are customers of Bank of Ireland paying 4.5% Standard Variable Rate when a phone call to Bank of Ireland could get the rate reduced to 3% fixed for 5 years. During the last crisis I was astonished at how few people facing deep arrears had availed of lower rates from their lender. A lender is not allowed to charge you a higher rate because you are in arrears.
5) Make sure you pay something every month. This really is critical.
6) Don't try to avoid calls from your lender. Engage positively with your lender. Take their calls. Respond to their letters.
If you pay something every month and engage with your lender, the lender will not seek to possess your home and, even if they do, the court will not give them an order.
7) Keep a note of every call you make and take. Always ask the name of the person you are speaking to. Make a note of the date and time of the call and what was discussed and agreed. Ask for their email address.
If you call and can't get through, make a note of that as well.
8) Keep a paper trail. After each call, follow up with a letter or email. Dear lender, following my discussion with your representative John Doe on Tuesday 15th, I want to confirm that as a result of the recent interest rate increases, I will struggle to meet my full mortgage payments. I want to avoid going into arrears and note that you have now initiated the Mortgage Arrears Resolution Process. In particular, if you could switch me to interest-only for two years, I will avoid going into arrears.
In the very unlikely event of the lender taking court proceedings, this file will demonstrate to the court that you did your best at all times and that the bank was not responsive.
9) Face up to the fact that it will be a very frustrating process
You will deal with a different person every time you speak to the bank. It will take them a long time to respond. You may call them and not get through.
10) You will have to complete a ridiculously long Standard Financial Statement. This is perfectly reasonable. Don't get up on your high horse about it. If you are asking to have your mortgage restructured, then it's reasonable that they will ask you to document your income and expenditure.
12) If you engage with your lender and pay something, you will not be troubled by legal proceedings. However, if you are, then check out this thread.
1) You are not going to lose your home.
The usual suspects will be out talking about tsunamis of repossessions. There won't be any tsunamis. There probably won't even be a wave. The tiny number of people who bury their heads in the sand, pay nothing and who don't engage with their lender or the courts, are at some small risk. But the vast majority of people who engage with their lender and who pay what they can, have nothing to worry about.
Over 100,000 mortgages were in arrears during the last crisis. Most of these were restructured and very few people lost their homes.
Despite the public perception, the lender does not want to repossess your home. Your mortgage is a source of profit for them and they want it to continue. They will work with you to restructure it if you work with them.
1A) You are not going to lose your tracker or your low fixed rate. You are not going to be penalised for going into arrears.
The Code of Conduct on Mortgage Arrears does not allow lenders to charge you additional interest because you are in arrears. Nor can the lender withdraw your cheap tracker or finish your fixed rate early.
So there is no reason not to engage with your lender.
1B) Take action immediately - don't put it off.
Don't put it off in the hope that something will turn up or that it will sort itself out. The sooner you face up to the issue, the easier it is to sort out.
1C) While you won't lose your home, don't use that as an excuse to do nothing
2) Do a review of your overall finances. Get the wisdom of the crowd by starting a Money Makeover thread.
2A) You need to take a strategic review
In the vast majority of cases, if you address the problem early and if you cut back a bit on your expenditure, and if you extend the term of your mortgage, you will be able to get back on track. But you may need a more dramatic solution such as a Personal Insolvency Arrangement or a Debt Settlement Arrangement.
And much of this depends on your age. At a certain age (50?) your pension could come into play.
3) Talk to your lender as soon as possible, ideally before you go into arrears. The Central Bank has a very formal Mortgage Arrears Resolution Process which the lenders must implement when borrowers approach them to say that they might go into arrears.
4) Check to see if your lender has a lower mortgage rate. There are customers of Bank of Ireland paying 4.5% Standard Variable Rate when a phone call to Bank of Ireland could get the rate reduced to 3% fixed for 5 years. During the last crisis I was astonished at how few people facing deep arrears had availed of lower rates from their lender. A lender is not allowed to charge you a higher rate because you are in arrears.
5) Make sure you pay something every month. This really is critical.
6) Don't try to avoid calls from your lender. Engage positively with your lender. Take their calls. Respond to their letters.
If you pay something every month and engage with your lender, the lender will not seek to possess your home and, even if they do, the court will not give them an order.
7) Keep a note of every call you make and take. Always ask the name of the person you are speaking to. Make a note of the date and time of the call and what was discussed and agreed. Ask for their email address.
If you call and can't get through, make a note of that as well.
8) Keep a paper trail. After each call, follow up with a letter or email. Dear lender, following my discussion with your representative John Doe on Tuesday 15th, I want to confirm that as a result of the recent interest rate increases, I will struggle to meet my full mortgage payments. I want to avoid going into arrears and note that you have now initiated the Mortgage Arrears Resolution Process. In particular, if you could switch me to interest-only for two years, I will avoid going into arrears.
In the very unlikely event of the lender taking court proceedings, this file will demonstrate to the court that you did your best at all times and that the bank was not responsive.
9) Face up to the fact that it will be a very frustrating process
You will deal with a different person every time you speak to the bank. It will take them a long time to respond. You may call them and not get through.
10) You will have to complete a ridiculously long Standard Financial Statement. This is perfectly reasonable. Don't get up on your high horse about it. If you are asking to have your mortgage restructured, then it's reasonable that they will ask you to document your income and expenditure.
12) If you engage with your lender and pay something, you will not be troubled by legal proceedings. However, if you are, then check out this thread.
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