Lenders do not want to repossess your home.

Chances are you are reading this because your circumstances have changed, often through no fault of your own. If you are in mortgage arrears it could ultimately lead to your home being repossessed. In general though, lenders do not want to see people lose their homes through repossession. The main reason for this is money. Repossession through court proceedings will cost your lender money and they're not guaranteed to win. Also, in the current credit crunch climate there is much scruntiny of lending practice. If your mortgage company has lots of repossession court cases then it going to reflect badly on them.

Mortgage arrears.

If you're behind with your repayments, even by a couple of months, your mortgage company may take action to reclaim the property. There's no doubt about it, it's a frightening development. It's at this stage that you can't put your head in the sand - your arrears won't go away and you must face it head on.

Lenders have the following measures which they can use to help if you are having arrears difficulties:

• Extend the term of your mortgage (capital repayment mortgages only). Your lender can help with arrears by agreeing to increase your mortgage term beyond the original terms, say from 25 to 30 years. This reduces your monthly payments and allows you concentrate on your arrears. However, in most cases this does not make a significant difference to your monthly repayments.
• Change the type of your mortgage. An endowment mortgage may be changed to a repayment, or interest only mortgage. This could release money from your endowment policy which could be put towards your arrears. However, you may end up paying more than your usual monthly instalment. You should also take appropriate professional advice.
• Defer payment (capital repayment mortgages only). Your lender may consider the possibility of you paying the interest on a temporary basis. Payment of part of the interest may be deferred for a temporary period. This may be particularly appropriate if you have a temporary shortfall of income (for example, through temporary illness), or where there has been a rapid increase in interest rates. Lenders may in certain circumstances be willing to accept, for a reasonable period of time, the most the borrower could reasonably afford if this is in the best interests of both the lender and the borrower. However, this is not a solution where, because of a permanent reduction in income, a borrower is unable to afford anywhere near the full mortgage repayments and there is little prospect of an improvement in the situation in the foreseeable future.
• Add your arrears to your total mortgage debt. The lender may agree to add your arrears to your total mortgage debt - this option is usually considered when your property is valued more than the amount outstanding on the mortgage. This may be appropriate where arrears have built up but full monthly repayments can be resumed. The amount outstanding (capital sum and arrears of interest) may be rescheduled and repaid over the life of the loan.
• Lenders may also offer to help you in other ways. Remember, do not sign anything until you feel comfortable with any explanation offered or before you receive independent financial advice.