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Reducing payments on a repayment mortgage

If you have a repayment mortgage, you may be able to reduce your monthly payments to make it more affordable. This could help to stop your arrears from rising if your problems are short term. It can also make paying off your arrears more manageable.

Getting help to negotiate with your lender

You will have to get your lender to agree to any changes to your mortgage, and you may have to pay an arrangement fee. Negotiating with your lender can be complicated. If you have an independent financial adviser, they may be able to help. Alternatively, you can get free advice from the National Debtline, Money Advice Scotland, a housing aid centre, the Citizens Advice Bureau or other advice agency. 

Reducing capital repayments

If your difficulties are short term, your lender may agree to allow you to pay only the interest on your mortgage for a few months. This option is most useful when your mortgage is close to being paid off and your monthly payments are mainly made up of capital. You will have to catch up on the unpaid capital later, so you need a realistic plan for future payments.

Some lenders will refuse to allow you to pay interest only if your mortgage is already in arrears. If this happens, speak to an adviser. They may be able to help you negotiate with your lender to reduce (rather than stop) your capital repayments to make them more affordable.

You may also be able to persuade your lender to accept reduced interest payments as well as stopping your capital repayments for a limited period. They will normally only do this if:

  • you are trying to sell your home, or
  • your problems are short term and you'll be able to meet the full repayments soon.

Extending the mortgage term

You might be able to negotiate with your lender to extend the number of years left on your mortgage (the 'term'). This will give you a longer period of time to pay back your loan, so your monthly payments will be smaller. The likelihood of your lender agreeing to do this usually depends on:

  • how large your arrears are
  • your age and expected retirement date
  • whether you have a permanent job
  • how much longer your current mortgage has to run (many lenders will not extend a mortgage beyond 25-30 years).

If you decide on this option, you can ask your lender to reduce your mortgage term again when your financial situation improves or interest rates fall.

Bear in mind that if you extend your mortgage term, you'll end up paying more interest on the loan. 

Adding the arrears to your mortgage

It may be possible to add any arrears you have to the rest of your mortgage (this is called 'capitalising the arrears'). It will mean that you can pay off any payments you have missed over the rest of the mortgage term. You will probably have to make higher monthly payments, unless you are also able to extend the term of your mortgage (see above).

You can normally only add your arrears to the rest of your mortgage when your financial situation improves. Most lenders will usually expect you to meet your regular mortgage repayments for at least six months before they will agree to it.

Flexible mortgages

If you have a flexible mortgage, you should have more freedom to repay your loan at the speed you choose. You may be able to decrease your monthly payments or take a 'payment holiday' and pay nothing for a few months. Some lenders will only allow you to do this if you have made extra payments beforehand to build up credit, but others may allow you to catch up on any missed payments later. If you need to do this, you should talk to your lender as soon as possible.

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The important points

  • If you want to make changes to your mortgage you have to get your lender to agree and you might need to pay an arrangement fee.
  • You might benefit from advice and help negotiating with your lender as this can be complicated.
  • If your difficulties are short term, your lender might agree to let you only pay the interest and not the capital part of your mortgage repayments.
  • One way to reduce your mortgage repayments is to extend the term of the mortgage, which means your payments will go down but you will end up paying more interest overall during the the mortgage term.

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