I can`t afford my mortgage payments

If you can`t afford your mortgage payments, that doesn`t necessarily mean your mortgage is the problem. Many people find they can`t keep up with their mortgage payments because the cost of servicing their other debts is taking up too much of their income.

Payments to unsecured debts, however, can be a lot easier to renegotiate than payments to a mortgage. If you end up in mortgage arrears, there`s always a chance this can lead to repossession - but if the real problem is your inability to keep up with payments to your unsecured debts, there may be a number of solutions available...

Debt management & mortgage payments

If you can`t afford your mortgage payments, debt management may be able to help. This involves negotiating with unsecured lenders, asking them to consider ways of helping you repay the debt at a rate you can afford. They may, for example, agree to accept lower payments, which could `free up` the money you need to stay on top of your mortgage payments. They may also agree to freeze / reduce the interest rates on your debts, so they don`t `snowball` while you`re making those lower payments.

However, making any change to the way you`re repaying any debt can have an effect on your credit rating, which can make it harder to obtain credit in the future. And of course, repaying a debt more slowly will delay the day you`re debt-free, and can cost you more in the long run.

IVAs & mortgage payments

An IVA (Individual Voluntary Arrangement) is a legally binding agreement between a borrower and their unsecured creditors. If you owe around £15,000 or more to multiple unsecured creditors and you can`t keep up with your payments, an IVA might be a good way to clear those debts and make sure you don`t fall behind on your mortgage payments. If you can reach an agreement with your unsecured lenders...

• You would agree to release equity in your home (towards the end of the IVA), and make fixed monthly payments for five years (the duration of most IVAs), based on how much you can afford after accounting for all your essential expenses: not just your mortgage payments, but also utility bills, food, petrol, clothing, etc. In other words, you`d be able to make the agreed payments towards the IVA (instead of payments to your unsecured debts) and still know that you could afford your mortgage payments.
• In return, your creditors would agree to accept those lower payments, not to pursue any legal action against you (including trying to make you bankrupt), and to write off any outstanding debt once the IVA has been successfully completed.

However, IVAs aren`t an appropriate solution for people who can`t commit to making payments for the duration of the IVA - and it`s important to realise it would stay on your credit report for six years from the day it begins, which can make credit harder to obtain and more expensive.

Debt help & mortgage arrears

These are just two possibilities. If you can`t afford your mortgage payments, it`s essential you talk to your mortgage lender about it and get debt help immediately - a debt adviser will be able to discuss your options with you, and help you decide on the best plan of action.

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