Definition:
Mortgage arrears occur when a borrower fails to make their mortgage payments on time. This can happen due to a variety of reasons, such as financial hardship or unexpected circumstances, and it can lead to serious consequences, including late fees, suspension of access to services, and even foreclosure. It is crucial for homeowners to address mortgage arrears as soon as they arise to avoid more severe financial outcomes.

Understanding mortgage arrears

When a borrower misses a mortgage payment, it typically does not result in immediate action. However, once the payments fall behind by more than 30 days, the lender may send a reminder or warning. If the arrears continue, the lender may charge late fees or report the arrears to credit bureaus, impacting the borrower’s credit score.

Consequences of continued arrears

If mortgage payments remain unpaid for an extended period (usually 60 to 90 days), the lender may take more drastic action, including:

• Imposing administrative fees or interest on overdue amounts.
• Restricting access to certain property privileges, such as gate access (in specific cases).
• Beginning legal proceedings for foreclosure or a power of sale to recover the debt owed.

How arrears affect your credit

Mortgage arrears can significantly impact your credit score, making it difficult to secure loans, new mortgages, or credit lines in the future. A poor credit history due to arrears may mean higher interest rates on any future financing.

Solutions and how to resolve arrears

If you’re struggling with mortgage arrears, it’s important to act quickly. There are several options available to help you catch up, including:

• Repayment plans: You may be able to negotiate with your lender for a payment plan or extension.
• Refinancing: In some cases, refinancing your mortgage to reduce payments or extend the term may be an option.
• Government assistance programs: Explore available programs designed to help homeowners facing financial difficulties.

Preventing mortgage arrears

The best way to handle mortgage arrears is to prevent them from occurring in the first place. Some tips for staying on top of your mortgage payments include:

• Setting up automatic payments to ensure timely submission of funds.
• Budgeting for mortgage payments alongside other financial obligations.
• Communicating early with your lender if you foresee difficulty making payments.

Getting professional help

If you’re facing difficulties with mortgage arrears, it may be helpful to consult a financial advisor or mortgage broker who can assist you in finding the best solution tailored to your situation. Acting early can help you avoid the worst consequences of mortgage arrears.

Last modified: November 11, 2024