Everyone needs a comfortable home to live in. Whether you’re a home owner who has already made their way onto the housing ladder, or you are living in a rental property, most people have housing bills to pay at the end of the month – and some people may need help to pay them.
In this article we explore mortgage and rent arrears; what they are, how people find themselves with property debts, and where you can go to get the debt advice you need to regain control of housing costs.
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What are rent and mortgage arrears?
Rent and mortgage arrears are different ways of falling behind on your housing payments, and can have serious consequences for people who continually fail to pay.
Renters live in properties they do not own, as tenants. Because it’s not your property, you will be expected to make a monthly rental payment to your landlord. If you fall behind with those rental payments, you will find yourself in rent arrears.
Mortgage holders are already in the housing market, and are considered the owners of their home. With house prices being so high, however, it’s very unlikely they have enough income to cover 100% of the price, which is why they will usually apply for a mortgage.
Mortgages are secured loans that allow mortgage holders to place a deposit on their property, and borrow the rest of the money they need from mortgage lenders. Your mortgage payment is the monthly payment you make to your mortgage lender in order to pay back the money you owe.
There are a number of upfront payments associated with buying houses, including deposits and stamp duty. For some one who is already stretched financially, it can be hard to keep up with mortgages, but failure to make payments can result in serious consequences, up to and including repossession of your home.
How to pay back rent or mortgage arrears
If you find yourself behind on mortgage payments or rent, it’s important to reach out the relevant creditors – whether that’s the letting agents or mortgage lenders. If you need help with payment, they may be able to come to an agreement with you.
First, however, you’ll need to work out where you are money-wise. Making a budget will help you get to grips with your financial situation, and you might settle on some ways of cutting your spending, which will help you with your housing costs.
When you do reach out to landlords or lenders, it’s important you don’t try to pay back more than you can afford. While you may think this will help you get on top of your situation more quickly, it can lead to bigger money problems further down the line.
If you’re struggling with your rent due to low income, or you’re already on benefits, you could also be entitled to extra Government support. The housing benefit is a regular payment towards your housing costs, and can be backdated for up to six months. You can also apply for a council tax reduction in order to lower your payments overall.
Who is responsible for paying rent or mortgage arrears?
Depending on your situation, it might not actually be down to you to pay back the full amount you owe in housing costs, so it’s important to check before you agree to a repayment plan.
For someone who rents and lives with another person, like a partner or a flat mate, you may have signed a joint agreement. That makes you both responsible for your rent, and any housing debts you accrue. If you live with other people but signed a tenancy agreement for yourself only, however, then all arrears are your responsibility.
In situations where you have taken over someone else’s tenancy, you’re only responsible for the rent due after your agreement has begun. It’s unlikely you will need to pay the arrears for the previous tenant, although you can be responsible for this in some cases of ‘succession’ or ‘assignment’.
With regards to mortgages, anybody listed on the mortgage agreement will be responsible for the arrears.
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Will Universal Credit cover my rent arrears?
If you are struggling with rent arrears and are on Universal Credit, you may qualify for additional support to help you settle your debts.
If you’re behind on rent, it’s possible for you to change the way you receive payment of the benefit. Either you or your landlord can ask for an alternative payment arrangement (APA), which enables you to have benefit payments paid straight to your landlord, in order to cover your rent.
APAs are designed to help people who find themselves in rent arrears. One of the big problems with arrears is that people in housing debt still need to keep a roof over their heads. That means they often struggle to pay their current rent payments while also attempting to settle previous housing debts.
With an APA, however, your rent will be paid directly to your landlord, leaving you free to focus on paying your housing debts. Alternatively, this can be arranged the other way around – with deductions taken directly from your credit and paid towards your arrears. That means you only have to focus on paying your current rent.
Can I do a mutual exchange with rent arrears?
A mutual exchange is a scheme aimed at renters. It allows them to swap their home with another council or housing association tenant, so long as they are granted permission from their landlord.
The scheme is useful for tenants who need to move areas for one reason or another. Rather than going through the process of ending their rental agreement with their current landlord and having to find another one, they can simply swap the rented home they have in their current area, for a rented home in the area they are moving to.
If you are interested in a mutual exchange, you will have to settle your debts first. Landlords usually insist any arrears are cleared before they will allow an exchange to happen, so it’s important this is something you take care of before applying, otherwise you may find your application is rejected.
Will the council house me with rent arrears?
Similar to mutual exchanges, it’s unlikely you will be able to move in to a new rented property if you still carry debt from a previous property.
While the decision ultimately rests with the council in question, most local authorities won’t allow you to apply for housing if have debts or arrears from a previous property – meaning you would have to clear your debt first.
What happens if you don't pay your rent or mortgage arrears?
If your rent arrears stack up to a troubling level and you are in debt to your landlord, there are a number of actions they can take against you. The most serious is eviction, also known as seeking possession.
Landlords must follow a process when seeking possession, which begins with giving you a written notice. This will include information on when they would like you to have vacated the property. You don’t necessarily have to leave by that date, however – if you want to force the issue, the landlord will have to take you to court in order to pursue your debts.
Landlords need to obtain a court order before they can evict you. The court order is known as a ‘possession order’, and they can only get one from the court once the notice period has run out. If the situation does get to this stage, the landlord will need to return to the court to get a ‘warrant of possession’, which allows bailiffs to use the power of the court to force your eviction.
The mortgage equivalent of eviction is repossession. Although you are technically the owner of your home, that’s only true if you continue to make your mortgage payments. If you don’t, the lender can apply to the court to ‘repossess’ your home. Moreover, your credit score will take a serious hit, and a lower credit rating could result in you facing higher interest rates and a struggle to access credit in the future.
Where can I get support with rent or mortgage arrears?
Nobody wants to live in fear of eviction, have creditors chasing them, or end up in court due to late payments. If you’re having problems with debts related to your mortgage or rent, it may be time to take stock of your situation, get free debt advice, and get back on top of your debts.
That’s where IVA Plan may be able to help. Our expert debt advisers have years of experience dealing with housing debt, and are on hand to provide you with information, give you free and confidential advice, and help you work through your debts.
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