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Are Charges For Mortgage Arrears Unfair?
Many mortgage customers are being charged between 20 and 50 pounds each month if they fall into arrears. The lenders argue that these charges merely reflect extra costs they incur and the costs cease when customers agree a repayment plan.
But critics are dubious. They say that the charges are too high and only serve to push borrowers closer to repossession. The problem is that when the borrower gets into financial trouble, administration charges of 20 or 30 pounds a month simply serve to make the situation more difficult to catch up.
Most mortgage lenders include a right to levy administration charges in the event of arrears in their terms and conditions. Nationwide charges 20 pounds per month, Abbey and Halifax both charge 35 pounds and GMAC charges 50 pounds a month.
But many advisers dealing with debt issues think that these charges are unfair and have been able to negotiate a repayment deal which means the charges are no longer being applied.
It must undoubtedly be true that some charges are unreasonable and by charging them, lenders are pushing those in arrears towards repossession. On that basis we think these charges are self defeating. They should be waived in the current economic recession because all they do is undermine efforts to keep as many people as possible in their homes.
Most mortgage lenders claim that if borrowers contact them, a repayment schedule can be sorted out and then the charges stop straight away. Nevertheless, a spokesman from the Citizens Advice, says he has seen cases where the charges have continued, whether or not agreement has been reached.
That is very unfair for people already in financial difficulty. And it is especially unfair if the people have reached an agreement with their lender.
It is not just debt advisers who are concerned with this situation. A judge who regularly hears repossession cases in the County Courts says his colleagues are well aware of this issue and has regularly raised the matter with lenders' representatives. But the mortgage lenders maintain they are trying to help people who are struggling to pay.
One of the UK's biggest mortgage lenders, say that when borrowers are in arrears it can offer to reduce payments by transferring the mortgage to an interest only mortgage or temporarily suspending of mortgage payments. And sometimes extending the mortgage's repayment period can help.
It is clear that if you cannot reach an agreement with your mortgage lender, then rather than ignore the situation and wait for the inevitable repossession, it is best to speak to a debt adviser. They will certainly negotiate with your mortgage lender and that might well help. But on the other side of the financial equation, they can see if there are ways of reducing your other debts to free up monies to pay the mortgage. If they can reduce your monthly outgoings by 250 pounds, then that money could then be used to pay the shortfall on the mortgage.
Debts can be effectively written off in part through either a Debt Management Plan or an Individual Voluntary Agreement (IVA). Such action may be seen as a bit extreme but if you are in danger of losing your home, it is time for extreme action.
But such action can only apply if income is coming into the home. If the wage earners have been made redundant or are unemployed then unless gainful employment can be found, repossession beckons.
Author Resource:-
Are your monthly Mortgage payments becoming a problem. Take a look at the Brokers Online web site. We offer our clients articles and information on Debt Management. We also provide Debt Advice, Debt Help, Debt Plans, IVA's and Redundancy Insurance.
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