Debt advice

How do I negotiate with my lender?

Your first step should be to make contact with your lender; do this as soon as you know you will be having problems making regular payments.

Send your lender a short letter explaining that you are aware of the problem and will get back in touch as soon as you can with proposals to clear the arrears.

This will give you time to draw up a Financial Statement showing your current Income and Expenditure. Various websites, including the Citizens Advice Bureau and the Money Advice Trust, have samples and advice on how to draw up a Financial Statement.

You now have the facts. So go back and talk to your lender again.

When approaching your lender with your proposals, you can either do this in person or in writing. It may be a good idea for you to put your ideas in writing, asking for an appointment at the end of the letter to come in and discuss them with your lender face-to-face. This way, your lender will have had a chance to look into your proposals before you meet to discuss them.

If your lender and you agree to something over the phone, remember to back this up in writing. Keep a copy.

In the meantime, It is important that you pay what you can, and to be as consistent as possible in making payments regularly. The reason for this is that if your lender ever goes to court to seek possession, your 'payment history' will be looked at carefully and it may be the cause of the court agreeing to an offer or not.

Only make an offer that you know you will be able to pay. It is important to be realistic. Ensure you have enough for your household expenses. The offer you make should be backed by your Financial Statement so that everyone involved can see clearly that you can afford it.

The offer you make will have to be paid on a month-by-month basis and you do not want the agreement to have to be varied only a couple of months after it was agreed on.

If your lender does not agree with your offer initially, point out to them that an offer made according to a detailed Financial Statement is in the best interests of both parties, as you are most likely to be able to keep to it. If you need to, present the offer again to a person who is senior to the one you are dealing with, or at the Head Office. You can continue with this strategy right up to the level of the Chief Executive if necessary.

All building societies and banks have internal complaints procedures; if acceptance is still not achieved for what you believe is a reasonable offer or proposal, bad administration may be involved. You can also direct your complain to the Building Societies/ Banking Ombudsmen.

While you are negotiating, it is good practice to start paying the amount you have offered, if your offer concerns money, rather than a re-negotiation of your mortgage terms.

Once an offer has been agreed on, try to stick to it and pay on time.

If your case goes to court, and you have been paying an agreed amount, this will be taken into account. Any offer will normally be accepted for a period of three to six months, and will be reviewed after this time.

However, if you are experiencing real difficulties or your circumstances change again after your offer has been accepted, you should inform your lender of this and re-negotiate your offer on the basis of a new Financial Statement.

Remember that it is never too late to contact your lenders about your arrears, if you have a proposal for clearing your arrears within a 'reasonable time', right up to the time of a Possession Warrant being granted. A 'reasonable time' is defined in case law as up to the lifetime of the mortgage, for most mortgages.

If it is not possible to reach an agreement with your lender and they simply proceed to court, bear in mind that you will be able to explain to the court the extent of your negotiations. You may then find that the offer you were putting forward to your lender is agreed by the court as acceptable. But you would want to be able to show evidence to the court of when and how often you contacted your lender, so remember to keep copies of all correspondence for this purpose.