Mortgage debt advice section

Understand your debts

There are many types of debts, but only a few of them could eventually lead to the repossession of your home.

Most people face repossession because they are unable to:

keep up the mortgage repayments, or
keep up payments on a secured loan.

On rare occasions, a house could be repossessed on account of rates or ground rent arrears, but this is hardly ever seen in practice.

Non-priority debts will certainly cause you financial headache, but will rarely result in the loss of your home, so make sure you consider this when making repayment offers.

Mortgage debt

The term ‘mortgage’ describes a loan used for the purchase of a house. If repayments are not kept up, the lender has the right to recover the money lent by repossessing the property and selling it.

There are a variety of different mortgages, such as capital repayment, interest-only and endowment mortgages. How you can deal with your mortgage arrears will, amongst other things, depend on the type of mortgage you have.

Mortgage debt is always a priority. Falling behind with your payments could ultimately mean you lose your home.

Secured loans / second mortgage debt

Secured loans, also known as second mortgages, allow homeowners to take out loans that are additional to the original loan used to buy their home.

Secured loans are often used for financing home improvements or refinancing debts, and are secured against the property. This gives the lender the right to repossess your home if you fall behind with repayments, so you will need to consider your secured loan a priority debt if you’re in arrears.

Unsecured loans

Bank overdrafts, credit card debts, payments of non-essential hire purchase goods, catalogue debts and any other loans that are not secured against your home should not be your priority when deciding what to repay if you’re in mortgage or secured loan arrears.

You will need to repay these debts eventually, but you will need to make realistic offers to your priority creditors first, before you redirect any disposable income to sorting out your non-priority debts.

In rare circumstances, however, even non-priority debts may put your home at risk.

Ideally, mortgage arrears should be cleared as quickly as possible. Lenders are willing to negotiate how best to achieve this, but you may need to commit to repaying them over a longer period of time.

If you know or think that you cannot afford repayments according to the arrangement that your lender is proposing, then don’t agree to the arrangement. A breach of a repayment agreement can make reaching another arrangement with your lender more difficult.

Remember, your home will only be repossessed if your lender has a legal reason for repossessing it and the correct procedure is followed. Repossession doesn't happen automatically and you may be able to stop it at any stage in the process.

Download the Mortgage Debt Advice Service Tips & Contact leaflet with information on dealing with mortgage arrears.