Repaying Arrears

Since your mortgage is a loan which is secured on your home, it is essential that you pay off any arrears. Arrears is the term given to the money you owe to your mortgage provider as a result of missing a repayment. There are a number of ways you can repay this money. You should start repaying it as soon as possible if you wish to avoid penalty charges. Although this will require paying more each month, it will save you money in the long run. Make a clear budget to see how much you can reasonably afford to repay each month, taking your income, savings and essential outgoings into consideration.

Some lenders will allow you to delay repaying arrears by adding them to the mortgage. This means that you will gradually repay them as part of your regular monthly repayments. However, by choosing this option, your monthly payments will increase and you will pay more in interest charges overall. In some cases, you will be able to extend your mortgage term. This means that you will pay off your mortgage later in life, but your monthly repayments will be reduced to a more affordable amount. Remember however, that this will increase the overall cost of your mortgage and could extend the term into your retirement, when your income is likely to be lower.

Making over-payments is usually the best option, especially if you have a flexible mortgage which allows you to vary your repayments and pay back as much as you can afford each month. In some cases, you can agree a suitable extra amount each month and avoid costly charges. If you wish to pay off your arrears in one payment, you may be able to do this too: ask your lender for details.

Ensure you decide how to repay your arrears as quickly as possible. If you do not keep your lender informed they are entitled to sell your home and reclaim their money. If you would like further information before your make a final decision, your local Citizens Advice Bureau can offer free, impartial advice to help you.