What to do if you can’t pay your mortgage

This advice applies to Scotland. See advice for See advice for England, See advice for Northern Ireland, See advice for Wales

If you’re struggling to pay your mortgage or are already behind on your payments, you can take steps to avoid losing your home.

Talk to an experienced adviser

Before making any decisions about your mortgage, you should consider getting independent financial advice.

You can also get advice from a Citizens Advice Bureau

Work out what you can afford

Before you talk to your lender, you should work out how much you can afford to pay towards your mortgage.

If you have mortgage debt, you’ll have to discuss with your lender how you’re going to deal with it and how you’re going to afford the ongoing mortgage costs. 

To work out how much money you’ve got coming in and going out, you can use a budgeting tool

Talk to your lender

If you’re struggling to pay your mortgage, you should contact your lender as soon as possible. 

They’ll normally write to you within 15 days of a missed payment, but you shouldn’t wait until then to speak to them.

If your income has dropped because of something unexpected 

Your lender should understand if your household income has dropped because of events such as:

  • a job loss in the family, for example if you were made redundant

  • an illness or accident

  • a death. 

Many lenders have specialist support teams who can explain what options they have.

If you can’t pay back a second mortgage or secured loan 

If you’re struggling to pay a second mortgage or another loan for which your property is used as security, you should get advice from an experienced debt adviser. You can get advice at a Citizens Advice Bureau

Strict rules apply to lenders offering you this type of loan if you have arrears. These rules are explained on the Financial Conduct Authority website.

What your lender might offer you

Lenders have to treat you fairly and consider any request you make to change the way you pay your mortgage. 

Depending on your circumstances, your lender might offer you the option to:

  • change when you pay - you might be able to take a break from paying your mortgage 

  • repay what you owe at a later date - you could arrange to have what you owe added to the capital outstanding on the mortgage. This is called 'capitalising the arrears'

  • reduce the amount you pay for a short period of time - you might be able to pay less towards your mortgage for the next few months

  • repay your mortgage over a longer period - this is called extending the mortgage term

  • reduce your monthly interest payments - you might be able to negotiate a lower interest rate if you have equity in your property 

  • change to interest-only payments - this is where you only pay off the interest on what you borrow each month

  • switch to a cheaper mortgage - you might be able to reduce your payments by changing to a fixed-rate mortgage.

How to make an offer to the lender

Once you’ve had advice about your options and worked out your budget, you should write an offer letter to your lender. The offer should include:

  • why you’re struggling to make your mortgage payments

  • what you can afford to pay each month

  • how your offer can cover the arrears as well as the ongoing mortgage payments - if the lender hasn’t already offered a more flexible payment option

  • a built-in review period

  • a copy of your household budget.

If you took out your mortgage from 31 October 2004 onwards, your mortgage lender has to follow the Financial Conduct Authority (FCA) rules when dealing with mortgage arrears.

The rules say that your mortgage lender must treat you fairly and give you a reasonable chance to make arrangements to pay off the arrears, if you’re able to. It must consider any reasonable request from you to change when or how you pay your mortgage. If your mortgage was taken out before October 2004 a lender has to abide by the code that existed then.

If you can’t agree with your lender and are in danger of losing your home 

If you have arrears that you can’t pay off or you can’t agree with your lender, you might be able to stay in your home with help from a mortgage rescue scheme.

There are a number of ways that you can get help to stay in your home. For example, you could become a tenant or a part-owner or you could put off paying your mortgage for a few years. 

If the lender won’t accept the offer 

If the lender won’t accept your offer, you should carry on paying as much as you can.

If you don’t think your lender has handled your case well, you should discuss this with them. If you decide to make a formal complaint, your lender should acknowledge your complaint within 5 working days. 

If you’re unhappy with the response from your lender, you can report your lender to the Financial Ombudsman Service using an online form.

It's almost never too late to try to come to an agreement with your lender, even if they’ve already started legal action. 

If you’re facing legal action for repossession, you might need help to negotiate, as it can be very stressful. It’s also important that negotiating with the lender is handled in the right way, because if you can’t make an arrangement you could lose your home.

Get more advice if your lender is taking legal action.

Check if you have insurance

If you’ve lost your job or your income unexpectedly, check if you have mortgage payment protection insurance. You might have taken a policy out when you got your mortgage or later. Your insurance might not be with your lender. 

There are lots of circumstances when your payment protection policy won't pay out. You’ll need to check the terms and conditions of your policy carefully to see if you’re covered. 

Check if you can reduce your costs

Check if you can get cheaper insurance

You might be able to switch to cheaper mortgage protection, building or contents insurance. You might have organised insurance with your lender or with another provider.

Find advice on how to reduce the cost of home insurance on the MoneyHelper website.

Change your endowment policy 

If you have an endowment mortgage, you could think about giving up your endowment policy or selling it off to an investor. This will provide you with a lump sum of money which you can use to help pay off the debt. 

You might be able to change your endowment policy by:

  • reducing or stopping your payments

  • cashing in your policy

  • selling your policy to an investor.

Making any changes to an endowment policy can be complicated and financially risky. If you’re thinking of doing this, you should get independent financial advice.

Cut down payments on shared ownership and shared-equity properties

If you own your property through a special scheme, you might be able to cut down your payments. Depending on what scheme you’re in, you might be able to sell back some of your stake in the property to the landlord or another part-owner. 

Examples of schemes in Scotland include:

  • shared ownership, where you pay rent and a mortgage - for example, with a registered social landlord

  • shared equity, where you pay a mortgage - for example, a Scottish government scheme such as LIFT, the New Supply Shared Equity scheme or the Open Market Shared Equity scheme.

Reduce your day-to-day spending

It might be worth checking your direct debits and cancelling anything that’s not offering you value for money. You might also consider switching providers for things like broadband or energy.

There are tips for saving money on the MoneyHelper website.

Check if you can increase your income

You might find it helpful to discuss ways to increase your income with an experienced adviser. You can get advice from a Citizens Advice Bureau.

Remember to take all the paperwork about your mortgage and any other debts that you want help with. If you want to work out your budget yourself, use a budgeting tool

Check if you’re eligible for benefits

You can check what benefits you might be able to get

You’ll need to input information about savings, income, pension, childcare payments and any existing benefits for you and your partner.

Schemes that help with mortgage payments 

The Home Owners’ Support Fund

The Scottish government’s Home Owners’ Support Fund is made up of 2 separate schemes:

  • Mortgage to Shared Equity - the government buys a stake in your property so you can reduce your mortgage 

  • Mortgage to Rent - a social landlord buys your home, and you continue to live there as a tenant.

Find out more about schemes that support homeowners in danger of losing their homes.

Support for Mortgage Interest

If your income and savings are low enough and you’re entitled to benefits, you might be able to get a government loan to help with mortgage interest payments. This is called Support for Mortgage Interest. Even if you can’t get it, maybe someone in your household can. 

Selling your home to pay your debts

If you don’t have enough money to carry on paying your mortgage or the arrears, you might decide that the best course of action is to sell your home. You shouldn’t do this without getting financial advice. 

Selling your home might seem like the only option when your financial situation is difficult, but there might be other ways of dealing with the problem until your circumstances improve. You should also be aware that if you have any difficulty selling your home, you’re still liable for all the costs until it’s sold.

Get more advice about selling your property to pay your mortgage debts.