Repossession and how to avoid it Solutions for avoiding repossession

A man looking at household bills

If you're struggling with your finances, talk to your lender as soon as possible

Ideally, you should explore these options before you miss a mortgage payment. If you are unable to pay, it's important to contact your mortgage lender promptly and explain why. It may be willing to agree to changes that make your mortgage more affordable.

Switch to an interest-only mortgage

If you currently have a repayment mortgage, where you pay off some of the capital as well as the interest each month, you can cut your monthly outgoings by changing it to an interest-only mortgage.

This means you stop paying back any of the capital so you'll have this large debt left at the end of the term.

For some, interest-only is a short-term fix, while others may stay on interest-only for years, paying off the capital from other investments or from the eventual sale of their property.

This is risky as you have to make sure you raise enough money from other sources (for example, investments) to pay off the debt at the end of the term. If you can't, you will have to sell your home to raise the money.

If the value of your home has fallen dramatically, you could be in negative equity and fail to raise enough from the sale.

Extend the mortgage term

Another way of cutting your monthly payments is to extend the length of the mortgage, from 20 to 25 years for example. By taking longer to pay you make the mortgage more affordable, although you will end up paying more in the long term in interest payments.

Suspend endowment payments

If you are using an endowment policy to pay off the mortgage, you can stop making payments to this and use the money to make interest-only payments instead.

This cuts your outgoings significantly but will reduce the eventual value of your endowment, and could leave you with a substantial shortfall. It can also leave you without life insurance, so you might have to arrange alternative cover.

Payment for life cover under the endowment will continue to be deducted from the policy value and you may therefore see the value fall quite quickly.

Remortgage to ease repossession concerns

In the current climate this is difficult, but you might be able to find a cheaper deal than your current provider's SVR. By paying a one-off arrangement fee you could make your monthly outgoing more affordable. Use the Which? mortgage deal finder to see whether you could save money by switching.

Emergency measures

If you are about to miss a payment, or are already in mortgage arrears, you need a quicker solution. Contact your lender and, with its prior agreement, you may be able to suspend payments for a while or add any missed payments to the outstanding loan to spread the cost over the term. You’ll end up paying more interest in the long run with these options.

Government mortgage help to avoid repossession

There are also government schemes that could help you. Visit the next page on mortgage help for more information.

More on this...

Which? works for you