I'm having difficulty paying my mortgage - what should I do?

The most important thing is to tackle any problem you have now, don't put it off. If you have a problem in meeting your mortgage payments tell your lender immediately. Also tell all your other lenders such as your bank and credit card companies. Keep them up to date as your circumstances change. If you're being considered for redundancy you might even want to tell your lender then.

After you've done that there are a few things to do that overlap:

Read Your Insurance Policy

Read carefully any mortgage/redundancy/payment protection policies you have. Check very carefully for any distinction the insurer makes between redundancy and compromise agreements.

Budget Planner

Create a budget and split it into essentials and luxuries. Be ruthless with luxuries - you can always have these later as things pick up. There are budgeting tools and personal finance software on the net, but the calculator on The FSA's site will give you a good starting point. You'll need a few recent bank statements to hand to build up a picture of your typical spend for things like weekly groceries. Look for ways to save money.

Benefit from Benefits

Find out about your entitlements to benefits. Once you've worked any benefits and policy payments into your budget see if you have a shortfall in what you can afford to make on your mortgage payments.

Attempt a Drop Lock

Before you go back to your lender, try to find out more about whether they can switch you to a better deal without a fee. This is known as a "drop lock". It's also worth looking into the Government's Homeowners Mortgage Support Scheme.

Take a Payment Holiday

If you have an interest only mortgage consider either a payment holiday on your endowment policy, or cashing in your endowment policy, paying off some of the loan, and moving to a smaller capital and interest mortgage. You'll be saving money short term, but weigh up carefully whether this would be a good long term idea, particularly if you don't expect to have a long term affordability problem.

If you have a capital and interest loan ask if the capital payments can be suspended, or if the period of the mortgage can be extended. Both will help in the short term, although over the long term you'll have to pay a little more.

Ask for Help

If you find any of this difficult don't forget that there are various voluntary bodies such as the Citizens Advice who can help you through this and suggest other money saving tips.

If you take action soon enough, and with a well thought through plan, you're much more likely to have your lender's support. Good luck!

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