‘Arrears’ is a term used in financial and legal situations, referring to the status of owed payments – and their corresponding due dates. It is used to describe something that has not received its payment by its set due date, so in simpler terms, ‘Arrears’ are overdue payments. If a payment is missed (one or more) the account will be in arrears – for example; a phone bill, or a mortgage.
If you miss your payments on your mortgage, and go into mortgage arrears, you will need to act quickly. Speak to your lender as soon as possible. Once your lender is aware that you are unable to make your repayments in time, they can help you get back on track.
In order to avoid mortgage arrears in the first place, have a look at these steps you can take.
Do a budget. Budgeting can be an incredibly important aid, even if you are not struggling with your money! A budget will organise your money and allow you to see anything extra you could possibly put away to tide you over if things get tight. It allows you to manage your outgoings efficiently, hopefully therefore preventing you from falling behind with repayments.
Speak to your lender. In order to prevent arrears, tell your lender if you feel you are in financial trouble. If you are looking to acquire state help of any kind such as Support for Mortgage Interest (SMI), you will need to negotiate a payment plan, and the sooner you do the better.
Take out MPPI. Mortgage Payment Protection Insurance (MPPI) is a short-term solution that will pay in full your monthly mortgage payments. However, like with any insurance, it is only the cover you have taken out so it cannot be a long-term method of staying out of arrears.
Getting a mortgage after arrears
Having been in arrears generally will not have as big an impact on your likelihood of getting a mortgage in the future as you may think. Of course, some lenders will have strict guidelines in place, and deny possible borrowers based upon arrears alone. However, there are lenders who will treat it like any sort of adverse credit, such as defaults, and after a period of time will accept your application. As you are most likely aware, you will be seen as a higher risk case, therefore it is important that once you have been in arrears you create a budget or use other methods to improve your credit rating. This will show your responsibility, which will appeal more to lenders.
For further advice and help, call us today on 0333 320 8658 or send us an email at [email protected] One of our experienced brokers will be happy to discuss your situation and hopefully, begin your mortgage journey.