Life doesn't always follow a linear, predictable path, and some months are simply more difficult than others. If you have been hit with an unexpected expense, lost your job or overspent in other areas without realising it, you may discover that you can't afford your next mortgage payment.
And that leads to the question: what next? The key is to act quickly to avoid missed mortgage payments, which can negatively affect your credit file and make it difficult to obtain loans, credit cards or even approvals for a new mortgage in the future.
Here, we have outlined four simple steps to follow if you have realised that you can't afford your next mortgage payment.
Speak To Your Lender Immediately
Before you do anything else, the first step is to contact your mortgage lender.
You might feel intimidated or embarrassed about being unable to pay your mortgage this month, but you are certainly not alone – a Guardian article found that 700,000 UK households missed or defaulted on a rent or mortgage payment in a single month in 2023 alone.
All lenders in the UK are required by the Financial Conduct Authority to treat borrowers fairly, and that means offering support when you need it. When you speak to your lender, they may offer you a temporary payment holiday or allow you to make interest-only payments for an agreed-upon period. Or, if the issue is likely to be ongoing, they may extend your mortgage term to reduce your monthly costs. Lenders are not as scary as they may seem!
Want to learn more about mortgage repayments? Check out our guide to mortgages here.
Check If You Qualify for Support for Mortgage Interest (SMI)
If you are claiming certain benefits and struggling with your monthly payments, you might be eligible for government help through the Support for Mortgage Interest scheme. This is a loan that helps pay your mortgage interest payments only. While it can help you avoid the pressure of missed payments throughout the loan term, you will still need to repay the loan when you sell the property.
To be eligible to apply for this loan, you need to be receiving Universal Credit, Pension Credit, income-related Jobseeker’s Allowance or Income Support. It typically takes 39 weeks to kick in, so you will want to apply as early as possible if you are eligible.
Consider a Short Term Loan
If your mortgage payment is due within days and you don't want to resort to contacting your lender, you can always consider covering the gap with a payday loan. This is worth considering if this month’s issue is a one off and you are waiting on a payslip that is due in a few days, but your mortgage payment is due tomorrow.
Just make sure to always choose an FCA-authorised lender, like CashASAP, and check that you are happy with the total repayment cost (including interest) before you apply.
If you are struggling to pay your mortgage due to how the payment lines up with your payday, you can ask the lender to push it back a few days. This is a reasonable request that your lender must consider.
Look at Your Budget Again
Unexpected expenses can hit us at the worst possible time, but if you are struggling with your mortgage’s monthly payments because you are spending more than you can afford, you will be wise to take a hard look at your monthly spending and cut what you can.
Cancel any subscriptions you don't use anymore, see if you can downgrade your phone contract and look at how else you can reduce your non-essential spending. You could even consider doing a low-buy year. If you have other debts like credit cards, see if you can agree a repayment plan with your card issuer, so you have extra money for your mortgage.
The prospect of missed payments on your mortgage can be worrying, but try not to panic. Remember that lenders would much prefer to find a way to keep you in your home than start the expensive and time-consuming repossession process. Being proactive and staying in regular contact with your lender should help you avoid repossession and help you get back on your feet as soon as possible.
