If you’re struggling to keep up with your mortgage payments, remember that any unsolicited offer of help that seems too good to be true could be exactly that.
The banking regulator the Financial Conduct Authority (FCA) has warned that borrowers in financial difficulties are potentially at risk of being misled by online sources and individuals who claim that there may be ways to avoid paying your mortgage.
It’s highlighted some of the things to look out for and why it’s vital to contact your lender if you’re struggling to pay. Here’s what you need to know.
Freemen on the land
“Freemen on the land” is the name given to people who claim they cannot be held liable for their mortgage or other debts, often citing misinterpretations of historic documents such as the Magna Carta.
These arguments have never succeeded in court. Many people in financial difficulty have paid fees to individuals who promise to stop repossession, only to lose their cases, their homes, and sometimes much of their equity. Borrowers can also be left with very steep legal costs.
If you are struggling with your mortgage, don’t believe anyone who says your contract isn’t legally binding. Instead, the FCA advises getting in touch with your lender as soon as possible. They may be able to offer you options to help you manage your mortgage payments or sell your home without racking up arrears and possession charges.
Promissory notes
Some online sources claim you can avoid paying your mortgage by sending your lender a notarised “promissory note”.
These notes, which may cost £500 or more to draw up, may say that a trust will make payments, or that the note itself should settle the debt. However, as you’re only making a promise to pay, lenders will not accept this as a form of mortgage repayment, and you’ll still owe the full amount.
If you are in financial difficulty, don’t push yourself further into debt by paying for a promissory note. Contact your lender or seek free, independent debt advice through services such as MoneyHelper or Citizens Advice.
Quick sale offers
If you’re behind with your mortgage payments, you may be approached with “quick sale” offers, where companies offer to buy your home at a heavily discounted price, sometimes up to 35% below its actual market value, in return for quick cash.
These deals often leave homeowners far worse off, so always seek independent legal advice before proceeding and ask your lender to see if they can offer any better options.
Sale and rent back
“Sale and rent back” schemes let an investor buy your home and rent it back to you.
Only FCA-authorised firms can legally offer this type of scheme, and using an unauthorised firm leaves you unprotected. You can find out if a firm is authorised by using the FCA Firm Checker service.
False sale prices
If you’re selling your home in a hurry, your buyer might ask you to inflate the property’s sale price so they can pretend they are covering some of the cost with a deposit, when in fact the lender will be covering the full cost. This amounts to fraud, and both the buyer and seller could face prosecution if caught.
Remember…
Don’t suffer in silence if you’re finding it impossible to keep up with your mortgage payments. Your lender should always be your first port of call, so steer clear of any offers that may not be in your best interests.
