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Clearing mortgage arrears usually means agreeing a plan with your lender to repay what you owe, on top of your normal monthly payments, over an agreed period. There is no single approach that suits everyone, but most solutions fall into a few categories: paying a lump sum, spreading the arrears alongside your normal payments, adding them to your mortgage balance, or, once arrears are historic rather than current, refinancing elsewhere.
The most useful first step is contact, not research. Lenders must treat customers who are struggling fairly and consider ways to help, including a payment arrangement, but they can only do that once they know your situation and how much you can realistically afford.
Start with your lender
Call your lender as soon as you know you are falling, or have fallen, behind. Explain what happened and, where you can, how long the arrears are likely to continue building. Ask specifically what forbearance options are available to you: lenders are required to consider these under the FCA’s mortgage rules, treating repossession as a last resort. Our guide to mortgage forbearance sets out what this generally covers.
Have your income and outgoings ready before you call, ideally as a simple budget. This helps your lender, or a free debt adviser, work out what you can genuinely afford, rather than agreeing to a plan you cannot keep up.
Options a lender may offer
Depending on your circumstances, your lender may consider:
- a payment arrangement, where you pay the arrears off gradually alongside your normal monthly payment
- a temporary reduction in your payments while things are difficult
- switching to interest-only payments for a period
- extending your mortgage term, which lowers monthly payments but usually means paying more interest overall
- capitalising the arrears, adding them to your mortgage balance
Each option has a trade-off. Paying less now can mean paying more in total, and some arrangements are recorded on your credit file, so ask your lender to explain exactly what will be reported and for how long.
Capitalising arrears: what it actually does
Capitalising means your lender adds the amount you owe onto your mortgage balance, clearing the arrears in one step. Your account is brought up to date, but your loan is bigger, so your monthly payment usually rises slightly to cover the higher balance over the rest of the term, and you pay interest on the added amount for as long as it remains part of the mortgage.
For illustration only, £2,500 of arrears capitalised onto a £140,000 mortgage would leave a balance of £142,500. Lenders often want to see that you can manage your normal payments comfortably before agreeing to this, and the history of missed payments still stays on your credit file for 6 years, even though the arrears themselves are cleared.
Capitalising also raises your loan to value slightly, since the balance you owe goes up while the property value stays the same. If you are close to a loan to value threshold that affects your options, ask your lender to talk you through the effect before you agree, particularly if you are hoping to remortgage once the arrears are cleared.
Paying arrears with a lump sum or overpayments
If you have savings, redundancy pay, an inheritance or another lump sum, using it to clear arrears in one go avoids adding interest and can bring your account up to date immediately. Check whether your mortgage allows overpayments without a charge, as some deals cap the amount you can pay off each year.
Smaller, regular overpayments can also help once you are back on track, reducing your balance and the interest you pay over the remaining term. This is separate from clearing existing arrears, but it reduces the chance of falling behind again.
| Option | How it clears arrears | Main trade-off |
|---|---|---|
| Payment arrangement | Gradual repayment alongside normal payments | Takes longer, needs affordable instalments |
| Temporary reduced payments | Buys time short term | Can mean arrears build further if used too long |
| Capitalising | Adds arrears to the mortgage balance | Bigger loan, more interest over time |
| Lump sum or overpayment | Clears arrears immediately | Needs available savings or income |
| Selling | Arrears repaid from sale proceeds | Means leaving the property |
This table is a general guide. Your lender decides what it is willing to offer, based on your account and your circumstances.
If you cannot realistically clear the arrears where you are
If none of these options are workable, selling with mortgage arrears may be a better outcome than waiting for a lender to start court action. Selling voluntarily generally gives you more control over timing and outcome than proceedings that reach court. Our guide on how many months of arrears before repossession explains the pre-action steps a lender must follow first.
What this means if you want to remortgage later
Current arrears, meaning payments you still owe, make it difficult to remortgage elsewhere, and many lenders will not consider an application until the account is fully up to date. Once arrears are historic and your payment record since has been clean, some lenders may take a broader view, particularly if you have reasonable equity. Our hub page on remortgaging with mortgage arrears explains how lenders generally view current arrears against historic ones, and remortgaging with cleared arrears looks specifically at that situation.
Getting free debt advice
Before agreeing to any arrangement, it is worth speaking to a free, independent debt adviser as well as your lender. MoneyHelper, StepChange and National Debtline can look at your whole budget, not just your mortgage, and help you decide which option is genuinely affordable. Getting help early, before arrears grow further, generally means more choices are still open to you.
Frequently asked questions
What's the fastest way to clear mortgage arrears?
A lump sum, such as savings or redundancy pay, clears arrears immediately and avoids extra interest. If that isn't available, a payment arrangement with your lender, repaying the arrears gradually alongside your normal payments, is the next most common route.
Does capitalising arrears remove them from my credit file?
No. Capitalising adds the arrears to your mortgage balance so the account shows as up to date, and your monthly payment usually rises slightly to cover the larger balance. The record of missed payments still stays on your credit file for 6 years from when each one was recorded, even though the arrears themselves are cleared.
Can I remortgage to pay off mortgage arrears?
It can be possible with enough equity, particularly once arrears are historic rather than current, but many lenders will not consider an application while arrears are still owed, and choosing a lender comfortable with adverse credit may take longer. See remortgaging with mortgage arrears for how lenders generally view current and historic arrears.
What if I can't afford any of these options?
Get free, independent advice from MoneyHelper, StepChange or National Debtline as soon as possible, rather than waiting until the arrears grow larger. They can look at your whole budget, help you prioritise your mortgage, and support you in agreeing something realistic with your lender that you can actually keep up.
Is selling a better option than trying to clear arrears?
It can be, particularly if the arrears keep growing despite your best efforts and none of the usual options are realistically affordable. Selling voluntarily generally gives you more control than waiting for a lender to start court action. See selling with mortgage arrears for how a sale clears what you owe.