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Arrears - paul hall 2010-07-30 15:53:18
 
my mortgage company is asking me if i would like to capitalise my arrears is this a good thing or not they took us to court at the start of the year for possesion but they did not get it we had the court to set paying the arrears at £35.00p/m on top of normal mortgage payment but every 3 months our mortgage still goes up due to interest even though our mortgage is fixed till sept 2011 when hopefully it may go down what would you suggest

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Re:Arrears - simon wiggins 2010-08-02 12:13:21
 
Hi Paul I assume you mean that they issued a summons to repossess your home but the court made either a suspended or postponed order based on payments of £35 per month on top of your contractual payments. If so then as long as you meet this no further action can be taken but if you break this order even by a day then the lender would be free to take further action. As such it’s very important that you make sure cleared funds are with your lender before the date the court set each month.

As far as capitalisation is concerned its an option open to you and involves the sums owed being added to the mortgage sum in its entirety and the monthly repayments rising as a result but its over the term of your mortgage rather than however long it will take you to pay them off at £35 per month.

To obtain advice on whether this is a good move you need to speak to an independent financial adviser as only they can look at your overall situation and advise you properly. All I can tell you is that when this occurs if a suspended or postponed possession order was made as the arrears are cleared in full it ceases to have effect (as long as you also pay off the costs of the judgment which are not usually added to the mortgage account) so in future the lender would have to start action all over again if you ran up subsequent arrears whereas at present you living on a knife edge so to speak on a month by month basis as it only takes one missed or late payment to open the doors for further action to be an option against you or your home.

If you don’t want to seek the advice of a local IFA then its a decision only you can take based on your situation as it stands Many people given this option choose to take it as it clears the arrears, removes the threat of further action and allows them to pay the debt off along with the rest of their mortgage so you need to evaluate the benefits of doing so once they have advised you of what the new monthly payments will be if you agree to the capitalization. Alternatively you can discuss the option for free at your local CAB or similar with a money adviser or debt caseworker who can also look at your overall financial affairs with you and suggest options to take forward. I hope this helps and good luck

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