FSA Guidance On Mortgage Arrears

The Financial Services Authority (FSA) regulates most mortgages issued after 31 October 2004, as well as most mortgage firms. The FSA also provides guidance on dealing with mortgage arrears. In addition to contacting your lender, the FSA suggests that you get independent advice on your financial situation, so that you can begin a financial recovery. Citizens Advice Bureaux are located all over the UK, and provide free advice for anyone needing help with debt. Another option is the Consumer Credit Counselling Service, which provides help with money management, as well as the FSA's own consumer website. There are many other free debt help organisations which should be used in preference to fee paying debt management companies. With a fee paying debt management company, you could actually end up paying your debt for longer, as well as a hefty up front fee.

Debt Consolidation Loans Can Be Costly
While secured loans provide one option for dealing with mortgage arrears, the FSA warns that this is a costly option, which puts your home at additional risk. Some people consider leaving their home and handing the keys to the mortgage lender. However, they are still liable for the mortgage until the property is sold and there is no guarantee that the sale price will be enough to clear the mortgage. This strategy could leave a property owner without a home and still in debt.

The FSA also suggests adding the amount of the arrears to your mortgage. This is an option if you have previously had arrears, but are now able to make payments. Adding the arrears to your mortgage will increase the amount owed, the interest due and the monthly mortgage payments. This strategy is best for those who have managed to keep to previous repayment arrangements, and whose house is worth more than the new mortgage total.

Endowment Policy Advice
For those with an interest only mortgage linked to an endowment policy, there is another option for handling mortgage arrears, says the FSA. If you have built up enough money in the policy, you could cash it in to repay the arrears. Once this has been done, then you need to change to a repayment mortgage so that future payments repay both the capital and the interest.

Don't forget to check on any policies that may help you to manage your financial difficulties. If you have mortgage payment protection insurance, see if you are covered for these circumstances. Make a claim if you are. If you are claiming benefits, such as the Jobseeker's Allowance, then you may also be able to get help with mortgage payments.

Finally, the FSA offer advice on what to do if your lender takes you to court. Don't worry; going to court does not automatically mean that you will lose your home. The key thing to do with court proceedings is to take them seriously. Don't ignore the paperwork sent out by the court. Read it, respond where necessary, and seek advice from the free debt help agencies. They all have experienced advisers who will help you to make sense of both the paperwork and the process. They may even be able to help you prepare your case.