How much can you afford?
Four main things affect what your monthly mortgage repayment will be. These are:
- how much you borrow;
- how long you borrow it for;
- the type of mortgage you have (e.g. interest-only or repayment); and
- the interest-rate deal you choose.
All these factors can vary, so use our Mortgage calculator to work out what your repayments might be. Simply enter the information it asks, and see what a particular mortgage will cost you each month.
Always check the Annual Percentage Rate (APR) and use it to compare mortgages. You pay back more than just the interest on the amount you borrow — other things may also affect the overall cost of the mortgage, such as administration fees, survey fees and insurance charges. The time at which the credit and other charges have to be paid back affects the rate of the charges and the overall cost to you. See What is APR? in our Loans section. You’ll see the APR quoted in Section 5 of the 
about this mortgage document.
Budget for increased costs in future
If you choose a variable rate mortgage (including a discounted or tracker rate), be prepared for your monthly payments to go up when interest rates rise.
If you choose a low, initial fixed rate or a discounted rate mortgage, allow for the increased cost when your interest-rate deal comes to an end.
Use the about this mortgage document which your lender or mortgage broker will give you to see whether you can afford your mortgage in the future and if rates rise.
You can afford it now, but what if...?
You may be able to afford the repayments now, but think about what could happen if, for example, your income falls or you or your partner lose your jobs. What if interest rates rise and your monthly repayments go up?
Using the Mortgage calculator and, looking ahead, enter interest rates that are 1% or 2% higher than they are now. Would you still be able to afford your mortgage and live life the way you want to?
There are things you can do now to help protect yourself against the risks of changes to your circumstances and interest-rate rises, such as:
- build interest-rate increases into your budget;
- avoid taking the maximum mortgage on offer;
- consider a fixed rate mortgage — but don’t forget that if rates fall your repayments won’t;
- build up your emergency fund;
- work out how much you’d need if you lost your job; and
- find out what your employer provides if you become ill.
There are insurance products available to help protect your income or mortgage repayments if something goes wrong and you may be offered these when you take out a mortgage. You should consider them but be aware that there are restrictions on when and how much they’ll pay out — see our Are you covered? guide and Protecting income or borrowing in our Insurance section.
You might lose your job through redundancy or find yourself unable to work due to long–term sickness. By law, an employer must pay most employees statutory sick pay for up to 28 weeks but this will probably be a lot less than full earnings. After that, you would probably have to fall back on State benefits. If you are self-employed, you have no employer to help so you would have to turn to the State straight away unless you have some savings. This is when insurance to protect you or your family's income or borrowing can be useful.
What you can do
Check whether you have insurance to cover you in these circumstances. You may have taken it out when you got your mortgage. It’s usually called Mortgage Payment Protection Insurance (MPPI) or Accident, Sickness and Unemployment insurance (ASU) – see Protecting income or borrowing.
Think about getting some help. Several agencies give free and independent money advice and they may help you avoid problems paying your mortgage. It’s best to contact them early, as the earlier you contact them the more help they can give you – see Get more help.
If you still feel you are going to have problems paying your mortgage, or you have already gone into arrears, you should contact your lender as soon as possible to discuss your problems. Again, the earlier you contact them the more help they can give you.
If you are worried about talking to your lender, most advice agencies will offer to talk to them on your behalf. You will need to let your lender know you are happy for this to happen.
For some useful tips on what to do if you have problems paying your mortgage or are facing repossession, see Mortgage arrears and repossessions.
Alternatively you can order or download a copy of our Problems paying your mortgage printed guide at Publications.
Remember – don’t ignore your problems as they are likely to get worse if you do. Advice agencies and your lender are there to help you.
What your mortgage lender will do
All mortgage lenders we regulate have to deal fairly with you if you have problems paying your mortgage.
This means they cannot ignore your circumstances and simply demand payment or repossess your property. So, when you contact the lender (or the lender contacts you), you should tell them about your circumstances and explain the problems you have.
The lender must use reasonable efforts to agree a way for you to continue paying your mortgage and give you reasonable time to repay any arrears you have built up. The lender should only start repossession proceedings if there is no reasonable way for you to continue paying your mortgage or you cannot repay any arrears within a reasonable time.
How your lender can help
Examples of ways lenders can help you pay your mortgage include:
- changing the way you make payments or the date you make them;
- giving you a grace period where you don’t have to make any payments (but generally only for a short period and where you can demonstrate your circumstances can improve);
- arranging a new payment plan with you. This may be a long-term plan or one that only lasts a few months while you overcome your problems (often a new long-term payment plan is a result of the lender changing your mortgage – for example changing from a repayment mortgage to an interest only mortgage or changing the term).
You should therefore ask your lender what plans they are prepared to offer (given your circumstances). You may also consider suggesting a plan yourself provided it is reasonable. The lender must consider all reasonable plans and, if they cannot offer a particular plan, they must explain why.
Information you will receive
We also require the lender to send you important information about your mortgage while you are having problems.
Within a month or so of going into arrears you will receive:
- our printed guide Problems paying your mortgage;
- information on your missed payments;
- the amount of your arrears;
- any charges incurred;
- your total mortgage amount; and
- details of any further charges you are likely to have to pay before repaying your arrears.
It is important you read and understand this information. If you do not understand any of the information you should talk to your lender or money adviser.
Also, while your account is in arrears, you will receive regular information (at least every 3 months) of:
- your payments due;
- the amount of your arrears;
- any charges incurred; and
- your total mortgage amount.
The lender may decide to send you extra information but this is the minimum you will receive.
If all this fails
If there is no reasonable solution to your problems then you will probably have to sell your property to repay the mortgage.
You will need to ask your lender if you can stay in your property until you sell it. The lender will consider this but it will depend on your circumstances. If the lender decides it is not reasonable for you to stay in your property then it must explain why.
If you can’t sell your property within a reasonable time, the lender may take court action to try to repossess your home.
Some companies may offer to help you with financial difficulties by buying your home and then renting it back to you for a fixed period of time (six months or more). These are sometimes called flash sales because they can buy your home quickly – sometimes within a week, but more often three to four. You may also hear them called mortgage rescue, rent-back or sell-to-let schemes.
We regulate the sale of these schemes. Make sure you deal with a regulated firm so you will have access to complaints procedures if things go wrong. To check if a firm is regulated, contact us.
They are not the same as a Home reversion, which is for people who have paid off their mortgage and want to sell part or all of their home for cash and keep the right to live in it for a nominal rent.
Selling your home in this way may allow you to clear your mortgage debts and stay in your home, but you will no longer own it. Watch out as:
- you will normally be paid less than the full market value of your home;
- you should check how long you can stay in your home as your rental agreement may not be renewed, so you could still have to leave after the initial term (normally 6-12 months) comes to an end;
- you could still be evicted if you breach any of the terms of your tenancy, for example if you fall behind with your new rental payments; and
- if the person or firm buying your home gets into financial difficulties, the property could still be repossessed and you might have to leave.
So think carefully before entering into such a scheme and make sure you understand the consequences. For a guide on how it may affect your right to Housing Benefit, read the Advice for homeowners – sale and rent back leaflet from the Department for Work and Pensions (DWP) – see Get more help. If you’re unsure, talk to a free and independent money adviser – see Get more help.
If your lender takes you to court
Before taking action for repossession the lender must send you information stating the actions it will take. The actions will involve taking you to court to try to repossess the property.
If the lender does take you to court, you should attend so you can put your case to the judge. A money adviser from one of the advice agencies will be able to help you. They can help prepare your case and may be able to represent you.
Even if a lender starts court proceedings, you won’t automatically lose your home. The lender must continue to look for ways for you to pay your mortgage, so you should continue talking to your lender and paying as much as you can. For more information see Mortgage arrears and repossessions.
If the property is repossessed
If the property is repossessed the lender must:
- market the property for sale as soon as possible;
- get the best price that may reasonably be paid; and
- pay you any surplus money as soon as possible after the sale of the property. Surplus money is any money left over from the sale less sale costs, and repayment of your mortgage and any other debts secured on your property.
If you still owe money after the property is sold
If the proceeds of the sale are not enough to repay your mortgage the lender must tell you:
- the shortfall;
- their decision to recover the shortfall from you (if they decide to recover the shortfall). The lender will tell you within six years of selling the property (five years in Scotland); and
- that they have told another party to recover the shortfall from you (if this is the case).
Top tips
- Don't borrow the maximum on offer unless you’re sure you can afford it.
- Plan your budget for now and the future.
- If you're getting into difficulties speak to your lender or a specialist debt agency as soon as possible.