Money Advice and Budgeting Service (MABS) advice on mortgage arrears

The Money Advice and Budgeting Service (MABS) gives the following advice to borrowers who are already in difficulty with their mortgage repayments in relation to their principal private residence (family home) or who anticipate, because of a fall in income, that they will be in difficulty.

• If you are in arrears, or are concerned about making repayments, contact your mortgage lender as soon as possible. If you make contact by phone it’s a good idea to follow up by letter, email, fax. Be aware that there is now a 12-month period from the time the first mortgage arrears arise before lenders can apply in the Courts to begin repossession proceedings. (Remember that the twelve-month requirement does not apply if a borrower is deliberately not engaging with the lender). You should make good use of this time. Don’t ignore the problem. Take steps to address the situation as early as possible.

• Continue to pay what you and other family members can afford. If you have been made redundant, check whether you have any Mortgage Protection Repayment Insurance. Find out how you can maximise your income e.g. do you meet the requirements to receive Mortgage Interest Supplement (MIS)? Visit www.citizensinformation.ie or call the Citizens Information Phone Service 1890 777121 (Monday to Friday, 9am to 9pm for more information on this, and other social welfare payments.

• Don’t ignore communications from your mortgage lender or their legal representative. They are obliged by law, under the Code of Conduct on Mortgage Arrears, to keep in contact with you and to make every reasonable effort to agree an alternative repayment schedule with you before seeking repossession of the family home.

• Be prepared - be sure of all facts and figures before you make contact. The first step is to make out your household budget listing your present or expected income and necessary spending. This will help you find out what you can afford to pay. There is a sample budget sheet available on the MABS website. If you need help, call the MABS Helpline 1890 283 438 (Monday to Friday 9am to 8pm) for advice or for a free self-help pack.

• Know what you can afford to pay to clear arrears on top of your mortgage payment. Be very realistic, taking into account the overall cost of running your household. Make a genuine and reasonable offer and don’t agree to try to pay more.

• If you know the offer you have made is all you can genuinely afford based on your budget, don’t adjust your offer in response to a lender’s demands. Restate that your offer is based on your ability to pay. Lenders are obliged, under the Code of Conduct on Mortgage Arrears, to take into consideration your overall indebtedness in establishing your ability to repay; this includes full details of household income and expenditure.

• Your lender may suggest alternative repayment options to you. Before deciding on any option you should ask your lender what it will cost in the short, medium and longer terms and ask if your credit rating will be affected.

• Some examples of alternative repayment options include:
  
  * To pay “interest only” for a period of time.
  
  * For the length of your mortgage to be extended to reduce the cost of monthly repayments.
  
  * For a payment moratorium (pause) to be put in place.
  
  The National Consumer Agency's website www.itsyourmoney.ie includes all details on each of these options.

• If you cannot afford to pay anything off arrears you could ask for your arrears to be capitalised i.e. become part of the money borrowed and paid off over the remainder of the mortgage. There may be other options – ask your lender! Look, if necessary, for short-term acceptance of your proposal (e.g. 6-12 months)

• Ensure that any alternative repayment plan agreed with your lender is put in writing. Under the Code, your lender must do this. Keep copies of all your communications. Assure your mortgage lender that should your circumstances change you will make contact with them with a view to reviewing/revising your situation with them immediately.

• If your negotiation is not proving successful ask if you could contact someone more senior or phone the MABS Helpline 1890 283 438.

• If your negotiation isn’t successful and you have made every effort to repay what you can afford, don’t be afraid of the threat of court action. However, if your case does go to court, more than likely you will be liable for the court costs. It will help your case if you can show that you are making a genuine effort. You should seek independent legal advice in such cases. In certain circumstances, you may be entitled to free legal aid or advice.

• Unfortunately, there are some situations where people will not be able to meet their mortgage repayments in the long term. If this applies to you, you must seriously consider your options. Independent legal advice from your solicitor and free, confidential and independent advice from a MABS adviser is recommended in such cases.

• If you are tempted to “hand back the key” remember that you will remain liable for the outstanding debt, including any accrued interest, charges, legal, selling and other related costs. This course of action may have other impacts in relation to, for example, your entitlement to certain social welfare benefits. Our advice is to get independent legal advice before considering this course of action. If you are experiencing difficulties with your mortgage don’t panic. There are many things you can do for yourself like drawing up a budget, negotiating with your mortgage lender and looking at all your options. You might need help with some of this but remember help is at hand, free of charge, by contacting MABS.