What Happens if I Can’t Pay My Mortgage in Surrey?

You’ve realised you can’t pay your mortgage – what happens now? With the average house price in Bookham standing at £700,000, over £800,000 in Thames Ditton and around £1,290,000 in Cobham according to Rightmove, mortgage repayments can be sizeable. A higher interest rate or drop in income can make it difficult to keep up.

Keep in mind, many homeowners have been in your position. Research by the ONS in 2024 found that increasing rent or mortgage costs were behind 21% of cost of living concerns.

While the situation isn’t comfortable, there are options. Read on as we explain what happens if you can’t pay your mortgage.

Help for arrears under the government ‘Mortgage Charter’

The Mortgage Charter was released amid steep rises in inflation and interest rates. The charter sets a standard agreed between the Financial Conduct Authority and the UK’s major mortgage lenders.

Under the Mortgage Charter, lenders must offer guidance to homeowners who seek help, provide information that helps borrowers to understand when their rate will change, and support those who are struggling to make payments.

Options when dealing with mortgage arrears

Please don’t ignore the problem. If you fail to pay the mortgage, what happens next may feel out of your control, but there are options available.

Read on as we summarise the solutions open to you, to deal with mortgage arrears. These are offered for general information, but if you’re struggling to pay the mortgage, there’s no substitute for specialist advice. Always consult an adviser to find out what’s best in your unique situation.

Get mortgage forbearance

Under forbearance rules, you can contact your lender for tailored support, and establish a short-term plan. They may temporarily reduce your mortgage payments, change your agreement to mortgage interest payments for a limited time, or offer a repayment break.

Apply for mortgage modification

Find out if your mortgage lender will agree to interest only payments, or extending your mortgage term over a longer period.

Choose to refinance the home

Refinancing allows you to move to a different mortgage deal, perhaps to secure a lower interest rate or a fixed-rate deal so you can plan ahead with greater confidence.

Support for mortgage interest (SMI)

A loan called Support for Mortgage Interest (SMI) is available for certain benefits recipients. However, it must be repaid with interest, so the government suggests speaking to your lender first – check gov.uk for information.

5 Decide to rent or sell the property

Consider downsizing to a more affordable property after selling up, or rent out your former home. Rentals require certain paperwork, but a good local agent can offer guidance.

6 Get a Deed in Lieu of Foreclosure or short sale

If you simply cannot pay your mortgage arrears, a Deed in Lieu of Foreclosure allows you to give up your home without legal action. This would avoid foreclosure but is not to be taken lightly, as it will impact your credit file and you may still owe money to your lender.

Process to follow if you can’t pay your mortgage in Surrey

Here’s what happens if you can’t pay your mortgage anymore.

1 Assess your finances

Mortgage repayments are a priority, so comb your monthly outgoings for non-essential spending you can reduce.

2 Speak with your mortgage lender

Approach your lender as soon as possible, and find out what options are available as an immediate or long term solution.

3 Check any mortgage protection insurance

Find out what your insurance policies protect you from as for example, you may have taken out mortgage protection cover when you first secured your mortgage. This may offer cover in certain situations, such as following an accident or redundancy.

4 Use a mortgage advice service (free)

Approach a free mortgage advice service for debt advice for help in exploring your options.

5 Consider whether to remortgage

Mortgage deals change over time and if you took out your mortgage in the last few years, interest rates may have gone down since. Find out if you can remortgage to a more affordable deal.

6 Start repaying existing arrears

Arrears can have a negative impact on your credit file, so consult your lender about repayments. Lenders have to treat borrowers’ requests for a repayment plan fairly.

Read our guides for more information on property sales, from how to get your house ready for scale, or buying and selling a house at the same time.

Understand your mortgage repayment options?

With an idea of what happens if you can’t meet the payments, hopefully you feel better equipped to find a way forwards. If you can’t pay the mortgage on your Esher or Claygate home, perhaps we can help. As a local estate agent, we can offer advice on selling or renting out your property in Surrey for numerous topics – from whether to downsize your house, release equity or sell your house during divorce.

Contact Davies Property Partners to discuss your situation.