Overview of Mortgage Arrears
Should you ever fall behind with your monthly payments, you will build up mortgage arrears. These are the amounts you have missed and owe, in addition to the outstanding balance.
For a month or two, most lenders will turn a ‘blind eye’ and perhaps send a letter at most. I think most lenders, even though they are businesses, realize that at times in life some disasters may occur. Things like divorce, illness, unemployment and death can throw life off balance and lenders usually try to appreciate that as best they can.
However, since they are businesses, there will come a time, often within three to six months when the mortgage arrears need to be repaid and the account put back in order.
How does a lender deal with mortgage arrears?
Ultimately, if mortgage arrears are not settled, the lender can pursue you through the courts and potentially repossess your property. Should this happen, they will sell it on the open market, many times at auction, to recover as much as they are able. The funds generated by the sale will be used to repay their loan.
I ought to point out that court proceedings are a very long and drawn out affair. It may take over a year to complete and in that time, costs will mount as will late payment charges and interest.
If you find yourself in this situation, the best advice I can offer is to do everything you can to behave honestly and openly. The lender’s staff are people too and they will be much more likely to offer suggestions or extra time periods if they think you are genuine and honest.