The mortgage on your house or apartment is one of the biggest and most important financial commitments that most people have. If you fall behind on these payments, it could put you in a very difficult place financially. When you miss mortgage payments, you may fall into what’s known as mortgage arrears. If you fall into arrears, your lender may eventually repossess your home. This is why it’s important to contact your lenders Arrears Support Unit as soon as you fall into arrears, or even pre-arrears. However, repossession is a last resort for your lender, as they generally want you to make all your payments on time. This is why, before they repossess your home, your lender is required to offer a Mortgage Arrears Resolution Process (MARP), per central bank guidelines. Under the MARP, your lender will offer a variety of solutions to help you pay back what you owe, in addition to paying back the amount in arrears in full.
If you enter the MARP, your lender will first conduct an assessment of your financial situation and your ability to pay back the debt that you owe them. After assessing your Standard Financial Statement, the lender will explore all options for alternative repayment agreements. Some of the possible options that your lender may present you with are as follows:
Giving you a payment break
In this scenario, your lender will give you a short term payment holiday to ease immediate financial pressure by giving you a break from paying your mortgage for a few months. However, your lender may still charge interest during these months, meaning you’d end up paying back more than originally planned.
Switching to an interest-only mortgage
This means that you’d only be paying the interest on the mortgage for a short period of time. Your lender may offer you an interest-only plan for under or over a year. You also need to make sure you can repay the capital on your mortgage at some point before the end of the term, and in some longer-term interest only plans, you may have to sell your property at the end of the term in order to pay back the outstanding balance.
Extending the term of the mortgage
Your lender may extend the term of the mortgage, reducing your monthly payments and making them more affordable. You will pay less each month, because the payments will be spread over a longer period of time, but it is important to note that your cost of credit (the difference between the amount you borrow and the total amount you repay after interest) will increase.