Borrowers can get into difficulties with making their mortgage repayments for a variety of reasons. Changes in financial circumstances as a result of becoming unemployed or splitting up with a partner are probably the two most common causes of mortgage arrears.

Dangers of Ignoring Mortgage Arrears
Unlike most other debts, failure to make mortgage payments could result in you losing your property and becoming homeless as a result.

If you find yourself in a situation where your financial outgoings continually exceed your income, continuing to repay the mortgage on your home should be your main priority.

You should start to take action as soon as your financial situation starts to deteriorate. The longer you wait before you start to address the issue, the more likely it is that your debts will continue to rise and the less likely that you will be able to obtain a satisfactory outcome.

Communicate with your Mortgage Lender
Repossession of a property is not most lenders' preferred option when it comes to dealing with mortgage arrears. However, if you don't keep your lender in the picture regarding your financial position, your mortgage provider might decide that no other option is available.

If you do not have any significant assets that you can sell to raise cash, solving your mortgage arrears problem is normally facilitated by using one of two basic strategies (or a combination of the two):

• Increase your monthly income;
• Reduce your monthly spending.

If you can persuade your lender that you are able to take steps to 'balance the books', they're much less likely to foreclose on your mortgage and make you homeless.

Increasing Income
Often, only a very slight increase in income can tip the balance in favour of healthier personal finances.

Do you have the option, for instance, of working paid overtime in your current job? If so, work some more hours. Find yourself an additional part time job - bars, restaurants and market research companies are always looking for part-time staff, often to work at times which do not clash with normal daytime working hours. In many cases, employers are willing to take on staff with no prior experience, such is the difficulty in recruiting and retaining staff in some sectors.

Alternatively, if you have space in your home, you might consider renting out a room to someone. You can earn up to £4,250 per annum, without income tax liability, by renting out a room in your home. However, you might need your lender's permission, first. Consent is likely to be forthcoming if the lender thinks that this will improve the odds of the mortgage repayments being made!

Reducing Outgoings
Reviewing your spending habits can often lead to surprising conclusions. Try to stop using your credit cards, particularly if you are building up debts on them, which you are not paying off. Credit cards are not a 'quick-fix' solution, simply because of the extortionate rates of interest that they charge.

Paying cash for absolutely everything can be a sobering experience as it does make you realise just how much you are spending, in a way that 'paying by plastic' does not. It can help you to control how you match your income to your outgoings and also stops you adding to your expensive credit card debt.

By Paul Giles