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Mortgage arrears (Scotland)

This fact sheet covers Scotland. We also have a version for England & Wales if you need it.

This guide gives you information and advice if you are behind with the payments on your mortgage. It explains your options to deal with this type of debt and the processes your lender must follow.

Use this guide to:

find out if there is any help you can get;
work out which option is right for you;
help you negotiate with your lender; and
get advice about how to deal with court action.

This guide also includes some useful contacts and links for you to get further help.

This guide does not deal with:

interest only mortgages that are coming to the end of their term; or
* interest only mortgages that have already ended.

Your options will be different in these circumstances so contact us for advice

You may have a first and a second mortgage.

The first mortgage is the loan you took out buy your home.
The second mortgage (also known as a 'secured loan', 'further advance', 'second charge' or sometimes a 'consolidation loan') is a separate loan secured on your home.

Check all your loan agreements to see if they are 'unsecured' or 'secured' on your home. If they are secured, you must treat them as priority debts because lenders can ask the court for possession of your home if you do not pay.

First Steps

If you are struggling to pay your mortgage or secured loan, and you haven’t already done so, get some advice as soon as possible. It is important to look at your whole situation, as you may have other debts that need dealing with as well as your mortgage. Contact us for advice.
It is never too early or too late to contact your lender. You may be worried about talking to them, but if you tell them you are getting advice, this should help. Write to them, phone them or make an appointment to see someone. If the first person you speak to isn’t helpful, ask to speak to someone else, perhaps in head office.
Pay as much as you can. Even if you have not paid for a while, or cannot afford the full amount each month, you should start paying as much as you can afford.

Most lenders are regulated by the Financial Conduct Authority (FCA). Before1 April 2013, the FCA was known as the Financial Services Authority (FSA). FCA rules say that a lender must ‘deal fairly with any customer who is in arrears’. The FCA rules are contained in the Mortgages and Home Finance: Conduct of Business sourcebook (MCOB). We list these rules later in this guide.

The Mortgage Charter

Most UK mortgage lenders have signed up to the Mortgage Charter. If your lender has signed up to the charter, they should offer you a wide range of support if you are worried about meeting your mortgage payments because of increased interest rates, or are already struggling to make payments.

For example, if you are up to date with your payments, your lender should allow you to switch to interest-only payments for six months, or extend your mortgage term to reduce your monthly payments. They should also give you the option to revert back to your original term within six months. You should not usually need an affordability check and this support should not affect your credit file.
From 26 June 2023, you should not be forced to leave your home within 12 months of your first missed mortgage payment unless you agree to do so or there are exceptional circumstances.
From 10 July 2023, you should be allowed to lock into a deal up to six months before your existing fixed-rate deal changes. You should also be able to manage your new deal and request a better like-for-like deal from your lender, if available, up until two weeks before your new term starts.

To check if you lender has signed up to the Mortgage Charter and to see the full range of support that is available under the charter, go to www.gov.uk and search for ‘Mortgage Charter’. If you are concerned that your lender is not following the charter, although they have signed up to it, contact us for advice.

Do you have a second mortgage?

It is unclear whether the Mortgage Charter applies to second charge mortgages. If you have a second mortgage and are worried about meeting your mortgage payments, contact your lender to ask what help is available and how it will affect your credit reference file. Also see the Second mortgages and secured loans section later in this guide.

FCA guidance

The Financial Conduct Authority (FCA) has also issued Guidance for firms supporting their existing mortgage borrowers impacted by the rising cost of living.

The guidance shows that lenders can offer a range of support options to help you avoid, reduce or manage payment difficulties caused by the rising cost of living. For example, support options could include temporarily reducing your interest rate, extending the term of your mortgage, allowing you to make interest only payments or agreeing a short-term reduction in your monthly repayments.

Contact your lender to see what support is available if you are finding it difficult to pay your mortgage or think that you are going to have difficulties in the near future. In many cases, your lender can offer you support without completing an affordability test.

Your credit rating will be affected if you no longer maintain your contractual mortgage payments. Your lender should also explain how any support options they offer you will affect your credit reference file.

Relationship breakdown

If you have experienced a relationship breakdown, you may need extra advice. Dealing with your lender, and applying for benefits can sometimes be more complicated following a relationship breakdown. For example, if your partner is named on the mortgage, then the lender may also want information from them before they agree to a new payment plan. Contact Shelter or contact us for advice. See Useful contacts at the end of this guide.

Help with mortgage payments

If you need help with your mortgage and you are claiming certain benefits, you may be able to apply for a loan to help with the mortgage payment. Support for Mortgage Interest (SMI) helps people who qualify with payments towards the interest payments on their mortgage.

Before 6 April 2018, SMI was a benefit. From 6 April 2018 SMI is a loan. The loan is provided by the Department for Work and Pensions (DWP) and will usually be secured to your property. The loan attracts interest. This is a complicated area so contact us for advice.

Which benefits do I need to claim to get a loan for mortgage interest?

If you claim Universal Credit (UC), Income Support, Pension Credit, income-related Employment and Support Allowance or income-based Jobseeker’s Allowance, you should be able to apply for a loan to pay some, or all, of the interest on your mortgage.

These are called qualifying benefits.

When can I claim the loan for mortgage interest?

If you claim Pension Credit (PC) you can qualify for help from the loan payments as soon as you claim PC. In other words, there is no waiting period.

If you claim UC, the rules changed on 3 April 2023. Usually, you cannot receive loan payments for the first 3 months of the claim.

If you claim Income Support, income-related Employment and Support Allowance or income-based Jobseeker’s Allowance, you cannot receive loan payments until you have been claiming these qualifying benefits for 39 weeks.

How much of my mortgage will be covered by the loan?

The government has set a maximum amount of mortgage that the loan will help towards. This is:

£200,000 if you are of working age; or
£100,000 if you receive Pension Credit. The Loan for Mortgage Interest is to be paid towards the mortgage on the house you normally live in. If you claim Income Support, Pension Credit, income-related Employment Support Allowance or income-based Jobseeker’s Allowance, the loan may also pay towards a secured loan for home improvements or repairs that you did prior to claiming benefits.

If you claim UC, the housing costs element is paid towards the interest payments due on any debt which is secured on your home.

How long can I claim the loan for?

You can claim the loan for as long as you are entitled to the qualifying benefit. There is no time limit for how long you can have the loan. This is different to the old SMI benefit.

Do I have to repay the loan?

You will be expected to pay the Loan for Mortgage Interest back. However, you do not have to start paying it back straight away. You will be asked to repay the loan if:

you sell your home;
the title for your property is transferred, assigned or otherwise disposed of; or
you die.

If you live at home with a partner who also claims benefits, the loan will not need to be repaid until both of you do not need the house any longer. In any of these situations, if there is not enough equity to repay the loan, any money still outstanding will be written off. In other words, if there is not enough money left from your house sale to pay off your mortgage and the Loan for Mortgage Interest, the DWP will not ask for more money.

You can choose to start to repay the Loan for Mortgage Interest. You must pay at least £100 at one time, unless you owe less than £100 in total.

Do I have to claim the loan?

No, you do not have to claim the loan. It is optional. If you do not agree to accept the loan, you will need to find another way of paying your mortgage payments. The MoneyHelper website has some useful information about this. You may need to take some independent financial advice to help you decide what to do. You can find a regulated, independent financial adviser on the MoneyHelper website.

Increasing your income

It is very important to make sure that you are getting all of the benefits and extra help to which you might be entitled.

If you have mortgage payment protection insurance, check to see if you can make a claim. If you are turned down, contact us for advice.

To check you are getting everything you should, use an online benefits checker. Use the benefits calculator at www.turn2us.org.uk or you could contact a local advice centre. Contact the MoneyHelper to find local advice. See Useful contacts at the end of this guide.

Contact Shelter Scotland on 0808 800 4444, or see https://scotland.shelter.org.uk to search for face to face advice.

See our [Help with payments fact sheet]() for more information. .

Mortgage arrears options

Each lender will have their own procedures for dealing with someone who is having difficulty paying their mortgage. In this section, we explain the most common types of arrangements that lenders will consider.

Also check whether your lender has signed up to the Mortgage Charter. If your lender has signed up to the charter, they should offer extra support if you are worried about meeting your mortgage payments because of increased interest rates, or are already struggling to make payments. See the earlier section, The Mortgage Charter.

There may be several options available for dealing with your mortgage arrears. Make sure that you check whether your lender will add extra charges for any option that you are considering.

Coming to an arrangement with your lender

Many people find that because their mortgage is high, or their income has fallen, they can’t pay their monthly mortgage instalments. If you are in this situation, explain the problem to your lender.

They may be able to offer you a reduced payment arrangement until your situation improves.
If you are already in arrears, they may be able to give you time to pay off your arrears.
See later headings in this section for examples of some of the most common arrangements that lenders can offer.
You may want to ask them about applying for the Scottish Government’s Home Owners’ Support Fund. See the later section Home Owners’ Support Fund for more information.
Even if you are finding it hard to come to a payment arrangement with your lender, always pay as much as you can afford. If your lender takes court action to repossess your home, the court will see that you have done your best to pay. If your lender is taking court action, see the later section Court action for details of what to do.
You may be able to apply for a ‘debt-payment programme’ under the Debt Arrangement Scheme. This is a special scheme to help you repay your debts at an affordable rate over a certain period. See the later section The Debt Arrangement Scheme (DAS) for more information.
If you have had a permanent change in your circumstances, or your lender cannot help, you may need to think about whether you can afford to stay in your home. See the later section Can’t pay my mortgage for information on what options you might have.

Mortgage pre-action requirements

The Home Owner and Debtor Protection (Scotland) Act 2010 introduced some ‘pre-action requirements’ that mortgage lenders and other providers of secured loans must follow before they can take action to repossess your home. Courts should not grant repossession orders until they are satisfied that the following requirements have been met.

Your lender must provide clear information about the terms of the loan and the amount you owe. This should clearly show your arrears, any added charges and details of any other debt you owe to them.
Your lender must provide you with information about where you can get help and advice about dealing with your debts.
Your lender must make reasonable efforts to agree a repayment plan with you before they start repossession action.
Your lender should not start repossession action if you are making payments that are likely to result in you paying off the arrears within a ‘reasonable period’.
If you agree a repayment plan, but then break it, your lender can start court action to repossess your home if they have followed the other pre-action requirements.
If this is the first time you have broken the agreement, your lender must give you notice that they intend to start repossession action. They also need to wait 15 working days after they have given you this notice before they apply to court. During this time you have the opportunity to catch up with any missed repayments.

Even if your lender has met the pre-action requirements, the court will consider a number of other factors when deciding your case. The court should only grant a repossession order if it is reasonable to do so in view of your circumstances.

Each lender has their own procedures for dealing with someone who is having difficulty paying their mortgage. In this section, we explain the common types of arrangements that most lenders will consider.

Arranging to pay off the arrears

If you can afford your monthly mortgage payment but have arrears, it is important that you start to pay your normal monthly payment regularly and come to an arrangement with your lender to clear the arrears.

Use your budget to work out if you can afford your normal payment, and what you can afford towards the arrears. If you haven’t worked out your budget yet, give us a call and we can send you the right budget to use for you and your business. If you have your figures ready, our advisers can help you complete your budget and send you a summary budget you can share with your creditors.

You will usually have to offer an extra monthly payment to clear the arrears. Lenders will sometimes ask you to pay off the arrears over 12 to 24 months. Ask for a longer time to pay the arrears if you cannot afford to do this. If you cannot manage to clear the arrears within the time your lender wants, start paying the amount you have offered anyway and explain why you can’t pay the amount they have asked for.

If your home is worth more than your total mortgage, tell your lender. An important court of appeal case, Cheltenham & Gloucester v Norgan, says that in this situation, a reasonable time to pay back the arrears could be the whole lifetime of the mortgage. Whilst this case would apply to English And Welsh courts rather than Scottish, you maybe able to argue that the 'spirit' of this law can be used in Scotland. Contact us for advice.

Don't borrow more

Don’t be tempted to take out an extra loan to repay your mortgage arrears. Often these are very expensive and could put your home at greater risk. Contact us for advice.

Changing to a repayment mortgage.

If you have an endowment mortgage, you may be able to change this to a repayment mortgage. Endowment mortgages include an insurance policy and, if you have had this policy for a few years, it may have a cash-in value (called a surrender value).

If you are thinking of cashing in your endowment policy, or changing to a repayment mortgage, you should always get independent financial advice. There may be a charge for this service. Contact MoneyHelper for a guide on getting financial advice. See Useful contacts at the end of this guide

Ask your lender about this and get independent financial advice on:

whether it is a good idea to cash-in or sell your endowment policy; and
whether changing to a repayment mortgage will reduce your monthly payments.

There are also other companies in the market who will buy insurance policies at higher rates than the cash-in value insurers will pay you. If you decide to sell and the policy is ‘assigned’ to your mortgage company, you must ask them to release it before you can cash it in. If you cancel your endowment policy, ask your lender about a mortgage protection insurance policy. This would pay the mortgage if you died.

If you do change to a repayment mortgage, you could also ask your lender to extend the mortgage term.

Increasing the mortgage term

Most mortgages are spread over a number of years. This is called the mortgage term. If you have already lived in your home for several years, you could ask your lender to extend the term back to the original term, or even longer. This could cut your monthly payments.

This might be helpful if your income has dropped, and you don’t think it will improve, and you need longer to pay back your mortgage. If you have arrears, increasing the term may mean you can afford to pay your new mortgage payment plus something towards the arrears.

If you have an endowment mortgage, increasing the mortgage term may be more difficult. Ask your lender.

Paying interest only

If you have a repayment mortgage, you could ask your lender to accept a monthly payment which covers only the interest part of the normal monthly payment. This will probably have to be a temporary arrangement. If you already have arrears, your lender may expect small monthly payments off the arrears as well.

Adding the arrears to your mortgage

This is called ‘capitalising’ the arrears. Normally you can only do this on first mortgage arrears, and usually only if the value of your home is a lot more than the mortgage. The amount you owe in arrears is added to your total mortgage. As a result, your monthly payments will go up. Repayment of the arrears is therefore spread over the rest of your mortgage.

Your lender may be more likely to agree to capitalise the arrears if you have already kept to a repayment agreement for some months. Lenders should take a balanced approach to the costs and benefits of capitalising if that will lead to a positive outcome for you, or it is in your best interests to do that, and you can afford the capitalised payments.

Financial Conduct Authority (FCA) Mortgages and Home Finance: Conduct of Business sourcebook (MCOB)

Earlier we mentioned the FCA’s MCOB rules. If your lender is regulated by the FCA, they will have to follow these rules. The rules can be useful to mention when trying to come to an arrangement with your lender.

The FCA rules are contained in the Mortgages and Home Finance: Conduct of Business sourcebook (MCOB). You can find this on the FCA’s website, www.fca.org.uk.

As well as treating you fairly if you are in arrears, the rules say that a lender must:

have a written policy on how to deal with customers who are in arrears;
set up a payment plan which is practical based on your circumstances and which covers the rest of the term of your mortgage, where appropriate;
consider all options to help you deal with your arrears and give you a reasonable period of time to consider options they suggest to you;
make you aware of any schemes run by the Government that may help you;
send you regular information about your arrears;
not apply charges to your account each month where you already have an arrangement in place to repay your arrears;
use payments you make to clear your arrears before clearing the charges that have been added to your account; and
not put pressure on you through too many calls or letters.

Complaints

Your lender should have a complaints policy which you can use if you feel that, at any stage, you have been treated unfairly. The first thing you should do is complain to the lender. There are special rules that cover how they must deal with your complaint. If you are not happy with the outcome, you can complain to the Financial Ombudsman Service, but you must have gone through your lender’s complaints procedure first. You can get more information about making a complaint from the Financial Ombudsman Service’s website. See Useful contacts at the end of this guide.

Property factors

If you live in a block of flats, a professional property manager, often known as a ‘factor’, may manage your property. Under the law, your factor should be properly registered. If you are having problems or disputes with your factor, ask for a copy of their complaints procedure. If you make a complaint to them and you are not happy with their response, you may be able to take your complaint to the First-tier Tribunal for Scotland (Housing and Property Chamber). See Useful contacts or contact us for advice.

Can’t pay your mortgage

Many people find that because their mortgage is high, or their income has fallen, they can’t pay the monthly instalments. If this becomes permanent and you think that you can no longer afford to stay in your home, you might still have some options. It is important to make sure that you are making the right choices. Contact us for advice.

Handing the keys back

There are alternatives to handing back your keys and your situation might not be as bad as you think. You might be able to get help from the Scottish Government’s Home Owners’ Support Fund, although it might be a better option to sell your home yourself, or through an assisted voluntary sale scheme. See the later sections Home Owners’ Support Fund and Selling and assisted voluntary sale and contact us for advice.

Disadvantages of handing back the keys

If you give your home back to your lender, you will still be charged the monthly instalments on the mortgage. If you do not pay, your lender will add the instalments to the debt you owe when the house is sold. They can also add extra interest onto the arrears figure. The monthly instalments will only stop being added when your lender sells your home. This could take a long time. Your lender will probably add solicitor’s and estate agent’s fees, plus any court costs, on to the bill.
Your lender will probably get a lower price for the house than if you sold it yourself. It is harder to get a buyer for an empty house. Empty houses are more likely to be vandalised or damaged.
If you give up your home and ask your council to rehouse you, they will probably say that you have made yourself ‘intentionally (deliberately) homeless’ and refuse to offer you anywhere to live. Contact Shelter or contact us for advice. See Useful contacts at the end of this guide.

See our Advice if you are worried about losing your home for more information.

Council tax

If you think that your mortgage arrears situation is hopeless, you might be tempted to hand the keys back to your lender. For most people this is not a good idea. Also, although you may not have to pay council tax for the first six months after you have moved out, after these six months you may start to be charged council tax again until your home is sold. Contact us for advice.

You may also have to pay certain bills for your property, even if you hand the keys back to your lender. This is a complicated area. Contact us for advice.

Home Owners’ Support Fund

The Scottish Government’s Home Owners’ Support Fund is designed to help you, as a last resort, if you are at risk of having your home repossessed. There are two types of help available. These schemes are targeted at people who would be eligible for help as a homeless person if their home was repossessed.

The Mortgage to Rent scheme is a way of staying in your own home, but as a tenant, rather than as a home owner.
The Mortgage to Shared Equity scheme involves the Scottish Government buying a share of your home, which means you can reduce your mortgage or loans secured on your home. You will still own your home and be responsible for its upkeep. Contact us for advice.

Selling and assisted voluntary sale

If you can’t afford to pay off your arrears in any other way, selling your home may be the best thing to do. Some lenders are now offering an assisted voluntary sale scheme. Under one of these schemes you would stay in your home until it is sold. Some lenders may suspend arrears charges until the sale takes place, or if your home sells for less than the mortgage, they may write off (not force you to pay) some of the shortfall. If you are thinking of selling your home or entering into an assisted voluntary sale, you need to think about where you will live.

Can you ‘trade down’ by selling your home and buying a smaller property?
If you sell your home and ask your local council to rehouse you, they may say you have made yourself intentionally homeless and refuse to offer you anywhere to live. If you can show that you had no choice but to pay for essentials for your family, such as food and heating, rather than pay your mortgage, the council may agree to rehouse you. Contact Shelter or contact us for advice. See Useful contacts at the end of this guide.
Consider renting from a housing association as an option.
Private renting may be an option, but you need to be careful about the type of tenancy you are offered and how high the rent is. Sometimes, if you claim Housing Benefit, your council can decide that your rent is too high and restrict the amount of benefit they will pay you.
You may have family or friends that you can live with, at least temporarily.

Sale and rent back

You may have seen adverts by private companies that say they will buy your home and rent it back to you. This is usually called ‘sale and rent back’.

Companies that offer sale and rent back schemes must be regulated by the Financial Conduct Authority (FCA). You can contact the FCA to check that a company is registered. See Useful contacts at the end of this guide.

Because of reports of poor behaviour by some of these companies, the FCA recently investigated the situation. They looked into things like people being evicted, even though the company had told them they could stay in their home. The amounts paid to buy homes were also often less than their market value.

Quick sale companies

There are companies that specialise in buying homes from owners in financial difficulty, or who otherwise need a quick sale. The price the company pays for your home will be less than its market value. There have also been reports of very high fees and companies making misleading claims about the true value of your home.

MoneyHelper warns consumers to be careful on their website page about Quick house sales. You will also find information there about how to make a complaint if you have received poor service from a company. Before agreeing to anything with a company offering you a quick sale, contact us for advice.

What if my home is worth less than my mortgage?

If your home is not worth enough to repay the mortgage in full, this is often known as having ‘negative equity’. If you have negative equity, your options can be limited. Your lender should consider allowing you to sell your home yourself under the FCA's Mortgages and Home Finance: Conduct of Business sourcebook (MCOB) rules. Some lenders may even offer you help to sell your home under a voluntary assisted sale scheme. Selling your home while you are still living there is likely to mean you will get a better price. See the earlier section Selling and assisted voluntary sale for more information. See our Negative equity fact sheet for more information.

If you hand back the keys or your lender repossesses the property, they will sell it. If your home is not worth enough to repay your mortgage, your lender can ask you to pay the difference. This is usually called a ‘mortgage shortfall’.

Mortgage shortfalls

When you bought your home you may have made a one-off payment to your lender for indemnity insurance. This is known as a mortgage indemnity guarantee. From 31 October 2004 these became known as ‘higher lending charges’ under the FCA rules. This means that if your lender repossesses and sells your home for a price which does not clear your debt to them, they can claim any loss from an insurance company.

The indemnity policy may only cover your lender’s loss to a set limit. So, if your debt is much bigger than the sale price of your home, you may still owe something to your lender, as well as the insurance company.
The lender and the insurance company often club together and one company will chase you for the whole debt.
Most second mortgages are not covered by an indemnity policy. Even if you repay your first mortgage from the sale, you may still owe something to your second lender.
Indemnity policies often vary, so contact your lender to find out whether you have paid for a policy and what its terms are.
The indemnity policy is usually insurance for your lender, not for you. The insurance company can ask you to pay them what they have paid out to the mortgage lender.

Limitation

The Prescription and Limitation (Scotland) Act 1973 sets out the rules on how long your lender has to take action against you to recover a mortgage shortfall. There are different legal views about whether a lender has 5 or 20 years to take court action to recover a mortgage shortfall debt in Scotland. You may need specialist legal advice if:

your lender is trying to recover a mortgage shortfall debt;
you have not made any payments towards it recently; and
you have not written to the lender about the shortfall recently.

What should I do if I have a mortgage shortfall?

You have options on how to negotiate with your lender. You could:

make an offer of payment; or
ask your lender to accept a small lump sum and write off the rest. (This is called an offer in ‘full and final settlement’.) See our Full and final settlement offers fact sheet for more information.

They could:

reject your offer, and take you to court; or
apply to make you bankrupt (although they are only likely to do this if you have bought another home).

If you are in a rented home and have no assets (valuable goods or savings), explain this to your lender or the insurance company. They may decide not to take any further action.

The FCA's MCOB rules say that the lender must tell you within five years of the date of the sale if they plan to recover the mortgage shortfall. If your lender first contacts you over five years from the date your house was sold, contact us for advice.

See our Mortgage shortfalls fact sheet for more information.

Second mortgages and secured loans

You may have a secured loan or second mortgage. Even if you are paying your first mortgage in full, if you don’t keep up with payments on the secured loan, you could lose your home.

Secured loans tend to have higher interest rates than first mortgages, and run for shorter periods, for example, 5 or 10 years.

What can I do?

If your home is worth more than your mortgage, you could ask your first lender if they can offer you a remortgage. This means giving you one new mortgage instead of the two you already have. This may be helpful as the new monthly mortgage payment should be cheaper than the two previous payments added together. Before signing any agreement, contact us for advice.
You may be able to apply for a ‘debt-payment programme’ under the Debt Arrangement Scheme. This is a special scheme to help you repay your debts at an affordable rate over a period of time. See the later section The Debt Arrangement Scheme (DAS) for more information.
You may be able to claim a Loan for Mortgage Interest (LMI) to cover the interest on a second mortgage if it was for certain home improvements. See the section Help with mortgage payments or contact us for advice.
Some lenders charge very high interest rates, or have contracts that change to a higher interest rate if you miss payments. You may be able to argue this is an unfair contract term. Contact consumeradvice. See Useful contacts at the end of this guide.

Consolidation loans and remortgaging

Beware of adverts in newspapers and on television offering loans to clear all your debts, often called consolidation loans. They can be very expensive and put your home at risk.

If you are thinking of remortgaging, you should always get independent financial advice. There may be a charge for this service. Contact MoneyHelper for a guide on getting financial advice. See Useful contacts at the end of this guide.

Time orders

With some mortgages and secured loans you can apply to the court for a ‘time order’. A time order is useful if you have a secured debt with a high rate of interest and large monthly instalments that you cannot afford. The court can reduce the monthly payments, extend the term of the agreement and even change the interest rate.

You cannot usually apply for a time order unless your lender takes court action to repossess your property.

You should get detailed advice from a local advice centre, or contact us for advice before applying for a time order. See our [Time orders fact sheet]() for more information.

Secured overdrafts

You may have a bank overdraft secured on your home (for example, because you have a small business). This may have high interest charges and no fixed monthly instalment to pay.

If the bank takes you to court, it may be difficult to suspend a possession order to pay off the overdraft in instalments. If you have an overdraft secured on your home, contact us for advice.

If a bank is asking you to agree to secure an overdraft on your home, contact us for advice.

Court action for mortgage arrears

You cannot be evicted from your home without a court order. However, in certain circumstances you can ‘voluntarily surrender’ the property to your lender. See the later section Court papers for more information.

Before the hearing

These are the usual stages leading to action in the sheriff court.

When you have mortgage arrears, your lender will write asking for you to pay them. If you have not already contacted your lender, do so now and try to reach an agreement. It is important that the offer you make is realistic. If you want to discuss your budget, contact us for advice.
If you don’t contact your lender to agree an arrangement to pay the arrears, they will write again. They may refer the matter to their solicitor who will write to you. Contact the solicitor and try to negotiate a way to pay the arrears. If the solicitor rejects your offer, you can insist that they tell your lender about your offer. Alternatively, contact your lender’s head office directly yourself to try to reach an agreement. Even if your lender refuses your offer, start paying the amount you have offered anyway.

The mortgage pre-action requirements say that a lender must make reasonable efforts to agree a repayment plan with the borrower.

The advice we give only applies to mortgage possession proceedings when your main home is being repossessed. Different rules may apply to second homes and holiday homes and also to property that is not lived in. Contact us for advice.

Court papers

If you cannot reach an agreement with your lender, and they have completed all of the pre-action requirements, it is likely that they will take action to start repossessing your home. If your lender does start repossession action, you have legal rights that may help you to stay in your home.

The Home Owner and Debtor Protection (Scotland) Act 2010 gives you the option of being represented by an approved ‘lay representative’. A lay representative is an approved individual, other than a legal professional, who can act for you in court proceedings. To find a local money adviser who may be able to act as your lay representative, visit Money Advice Scotland’s website www.moneyadvicescotland.org.uk.

Calling up notice

A Supreme Court case, Royal Bank of Scotland v Wilson, confirmed that your lender should send you a ‘calling-up notice’ before they can go to court to repossess your home. A calling-up notice ends the mortgage agreement and will ask you to repay the whole amount you still owe on your mortgage.

The calling-up notice should tell you:

the total amount you owe at the date of the notice; and
that you have two months to pay the whole amount you owe.

As long as you don’t leave your home voluntarily, your lender will have to apply for a court order to confirm that they have a legal right to sell it.

What can I do if I get a calling up notice?

To stop your lender taking more steps to repossess your home, you will have two months to either:

repay the loan in full; or
come to an arrangement with your lender to repay the arrears and continue with the loan agreement.

After you have received a calling-up notice, your lender can only repossess your home if:

you ‘voluntarily surrender’ the property; or
the court grants a court order after an application to court by the lender.

Voluntary surrender

You can give your property back to the lender after you have received a calling-up notice as long as your lender gets written proof from you (or someone in your household such as your partner) that:

the property is not occupied;
you have agreed to the voluntary surrender; and
you have not been put under pressure to make your decision to give your home back to the lender.

If you don’t want to leave your home in this way, the mortgage lender will usually make a court application under section 24 of the Conveyancing and Feudal Reform (Scotland) Act 1970 to repossess your home.

Court action - section 24 applications

If your lender makes an application under section 24 of the Conveyancing and Feudal Reform (Scotland) Act 1970, the forms you should receive include:

an initial writ;
form E ‘Notice of proceedings’; and
form F ‘Notice of proceedings’ addressed to the occupier rather than the borrower.

If your lender makes an application to court to repossess your home after you have received a calling-up notice, but the papers you receive do not include an initial writ, contact us for advice.

If your lender has already taken court action but did not serve a calling-up notice on you, you may be able to claim compensation from them. This is because the Supreme Court case Royal Bank of Scotland v Wilson decided that other types of court procedure to repossess your home for mortgage arrears are not valid. This is a complicated area. Contact us for advice.

You are likely to need help to respond to these forms and apply to ask the court not to grant your lender the right to sell your home. See the earlier section on Court papers for more information about finding an adviser who may be able to help you. If you don’t take any action, the court will consider agreeing to your lender’s application. To stop this from happening, you can do the following.

You can try to negotiate a payment arrangement with your lender to stop the case going to court. Even if you agree a payment arrangement with your lender, they may still take your case to court. Lenders do this so that if you miss payments, your home can be repossessed more quickly. If you have to come to an arrangement with your lender and there is still going to be a court hearing, make sure you go, even if your lender tells you that you don’t have to.
If your lender still takes the case to court, you can ask the court not to grant your lender the right to sell your home. For more information about how the court will look at your case, see the next section.
Things can go wrong with how a lender takes a case to court and you might be able to challenge or ‘defend’ the case. Even if you think you have a defence (for example, the amount your lender says you owe is wrong), it may be best to try to reach agreement on this point with your lender. This is because if your defence goes to court, it may increase your final costs, as your lender will be able to change their claim in response to a defence by you and charge for doing this.

Who can apply to stop repossession?

If you are the husband, wife, civil partner or partner of the mortgage borrower, you can also ask the court not to grant the lender the right to sell your home. You are known as an ‘entitled resident’.

If you used to live with the mortgage borrower, you may be able to apply to the court to stop the repossession if you are still living there. You can do this even if your partner has left you, if:

you lived with them for six months before they left; and
a child of the relationship (under 16) is living in the property with you.

How will the court decide what to do?

The first thing that the court must look at is whether or not your lender has met the pre-action requirements for mortgage arrears. If the court considers that your lender has not met the pre-action requirements, the case will be dismissed. If the court is satisfied that your lender has met the pre-action requirements, it will go on to consider whether ‘it is reasonable in all the circumstances’ to make a repossession order.

The sheriff must take into account:

whether or not you are in a debt-payment programme under the Debt Arrangement Scheme (see the later section The Debt Arrangement Scheme (DAS));
how much you owe;
your reasons for getting into arrears;
your ability to meet the obligations of the mortgage within a ‘reasonable’ period;
any action the lender has already taken to help you; and
the ability of anyone living in the house to find other reasonable accommodation.
There is no guidance on what is a reasonable period, but recent experience suggests that some sheriffs will allow repayment over extended periods of up to 10 years or more. English courts are now accepting these long term arrangements after a case called Cheltenham & Gloucester v Norgan and this may influence practice in Scottish courts.

If the court refuses to grant your lender the right to repossess your home, the sheriff may put the case on hold to give you a chance to pay your mortgage arrears by instalments. This is called ‘sisting’ the case. It is important that you stick to the arrangement that is agreed by the court. If you break the arrangement, your lender can apply again for the right to repossess your home.

Change of circumstances

If your circumstances change and you cannot keep up with the payments that the court agreed to, contact your lender immediately to see if you can come to a new payment arrangement. The benefit of doing this is that you would avoid having to pay the further costs of going to court again. It is always a good idea to get any new agreement confirmed by your lender in writing.
If you cannot reach a new agreement with your lender, they can apply to court to repossess your home. You can still ask the sheriff to allow you time to repay the arrears at a new rate that you can afford. However, they do not have to do this and your lender’s request may be granted.

Deciding what to do

Check the court papers you have received for details of what your lender has said in their case against you. You can find this out from a special part of the court form called the ‘particulars of claim’ or ‘condescendence’. Read them carefully to see if you agree with all the facts. If you think that the information is wrong, get legal advice. Contact us for advice about how to seek legal advice that is suitable for you.
Use your budget to work out how much you can afford to offer.
Offer your lender an amount which you can afford. If your lender has already refused your offer, you will need to show the court that your offer was reasonable. It might help you if you are represented in court.
It is important to start paying the amount you have offered. You should do this even if your lender has not agreed the arrangement, or if you are waiting for a court hearing.
In Scotland, only a solicitor or approved ‘lay representative’ can represent you in this type of case. Your local advice centre may have approved lay representatives and in some areas of Scotland there are community law centres which may be able to help you. For more information about finding a lay representative, see the earlier section on Court papers.

Mortgage repossession hearing

You should go to the court hearing, even if you have made an agreement with your lender. You will not be evicted from your home on the day of the hearing. If you are not able to go to the hearing because of illness or disability, write to the court to explain your circumstances. Don’t forget to include the case number in the letter. This can be found on the papers you received from the court.

When you go to court

Make short notes about what you want to say in the hearing.
If English is not your first language, you could take an interpreter with you.
Don’t be afraid to approach your lender’s representative before the hearing to see if you can come to an agreement to present to the sheriff. Don’t be pressed into offering more than you can afford.
If your lender’s representative does not agree to a proposal, you should ask the court to accept your offer.
If you can pay all the arrears in a short time, for instance through a remortgage, ask for a ‘continuation’ (or adjournment).
If you don’t agree with the arrears figure, ask for a continuation so that your lender can provide a detailed statement of your account. The sheriff may agree or insist on a defence being stated and fix a date for a full hearing, called a ‘proof’.
Watch out for extra costs being added on for each hearing you go to. You can ask the sheriff to order that your lender pays their own costs, for example, if their figures are wrong and your hearing has to be continued. Don’t assume this will happen automatically. If your lender is adding extra costs to your arrears, contact us for advice.

Entitled resident

An ‘entitled resident’ can apply to the court to put a hold on repossession action, or make a defence, even if they are not called to court as the ‘defender’. Someone who is part of the household, such as a spouse, civil partner, or partner living in the family home as a couple, can ask to remain in the home. The sheriff should take into account their personal circumstances when deciding what order to make.

Repossession

If the court orders repossession, your lender can apply to the court for a ‘decree of ejection’. This is a notice served on you by sheriff officers which gives you a date and time when they will come to evict you. If your lender does this, they must inform your local council. This can help to make sure that you get the extra advice and help you need about your housing options.
You have the right to appeal to your lender asking them to give you time to get another home. Usually they will give you 14 to 28 days.
You, or an entitled resident, may be able to apply to have the court order recalled (that is, reversed). For example, you can do this if you did not appear and were not represented when the court considered your lender’s application to repossess your home. This application can be made at any time up until the date of eviction. However, you can only make this application once.
It is still not too late to try to make a deal with your lender; but you may need to be able to find a lump sum to pay off some of the arrears (for example, 50%) and make an offer to repay the rest of the arrears plus legal costs.
If repossession cannot be avoided, it is probably best to try to move out before the day of the repossession. Sheriff officers will give you every chance to be out in time, but if you are not, they have the power to ‘open and shut lock fast places’ (break in, move your furniture out on to the street and change the locks). They are officers of court and it is a criminal offence to resist sheriff officers when they are carrying out their duties.
Sheriff officers are unlikely to try to seize your furniture. If they do, contact us for advice.

After eviction

After you are evicted, your lender will still add interest to your mortgage account until the property is sold.

They must follow FCA rules and sell your home for the best price that might reasonably be paid, taking into account factors such as market conditions. However, because your lender is selling, it is likely to produce a lower price than if you sold it yourself.
They must use the money from the sale to pay off the court costs, estate agent’s and solicitor’s bills, the mortgage and any second or third mortgages.
They must tell you in writing how the money has been spent.
They must send you any money which is left over. Remember to give them your new address.

Mortgages are paid off in the order you took them out. If selling your home does not raise enough money to repay the first mortgage and any other mortgages plus all the costs, you may still owe some money to your lenders. See the earlier section on Mortgage shortfall for more information. Your lender could take court action against you to collect the rest of the debt using the same court procedure as for credit debts. Contact us for advice.

The Debt Arrangement Scheme (DAS)

A DAS debt-payment programme is a special scheme to help you repay your debts at an affordable rate over a certain period. However, it will only provide protection from bankruptcy and diligence. This means that a mortgage or secured loan lender could still take repossession action if you are behind with your mortgage or secured loan payments. You can exclude mortgage arrears and secured loan arrears, if that is what you want to do. For instance, you may already have an arrangement to repay your mortgage arrears and secured loan arrears agreed with your lender. An excluded debt will be noted in the debt payment proposal.

If your lender still starts the procedure to repossess your home, the court will take this into account. Also, one of the factors the court must consider, when deciding if it is reasonable in all the circumstances to allow eviction to go ahead, is whether you are in a debt-payment programme.

See our Debt Arrangement Scheme (DAS) fact sheet for more information.

Useful contacts

consumeradvice.scot Phone: 0808 164 6000 www.consumeradvice.scot

Financial Conduct Authority Phone: 0800 111 6768 Email: consumer.queries@fca.org.uk www.fca.org.uk

Financial Ombudsman Service Phone: 0800 023 4567 Email: complaint.info@financial-ombudsman.org.uk [www.financial-ombudsman.org.uk]https://www.financial-ombudsman.org.uk/()

Housing and Property Chamber First-Tier Tribunal for Scotland Phone: 0141 302 5900 Email: HPCadmin@scotcourtstribunals.gov.uk www.housingandpropertychamber.scot

Money Advice Scotland Phone: 0141 572 0237 Email: info@moneyadvicescotland.org.uk www.moneyadvicescotland.org.uk

MoneyHelper Phone: 0800 111 3797 www.moneyhelper.org.uk

Scottish Courts and Tribunals Service Phone: 0131 444 3300 www.scotscourts.gov.uk

Scottish Government Phone: 0300 244 1093 (Home Owners' Support Fund) Email: hosf@gov.scot www.gov.scot

Shelter Scotland For advice or to find your nearest housing advice centre. Phone: 0808 800 4444 scotland.shelter.org.uk

Other fact sheets that may help you

Advice if you are worried about losing your home

Debt Arrangement Scheme (DAS) fact sheet

Full and final settlement offers fact sheet

Mortgage shortfalls fact sheet

Negative equity in your home fact sheet

Time orders fact sheet

The Money Advice Trust would like to thank Shelter Scotland for their kind help in preparing this housing guide.