Mortgage arrears in Scotland

If you fall behind with your mortgage in Scotland, your lender must treat you fairly, consider changes such as extending your term or temporarily reducing what you pay, and follow set legal steps before it can ask the sheriff court for the right to repossess your home. FCA rules say repossession should only happen when all other reasonable attempts to sort things out have failed. There is also Scottish Government help for homeowners at risk.

What must your lender do if you fall behind?

Most home mortgages are regulated by the Financial Conduct Authority (FCA). Its rules for mortgage lenders (MCOB 13.3) say a lender must deal fairly with you if you have, or may have, payment difficulties. That includes if you tell it you are at risk of falling behind. The lender must:

• tell you that free, impartial debt advice is available and point you to it
• make reasonable efforts to agree how you will repay the arrears, bearing in mind that it is better to agree an alternative to repossession
• deal with a debt adviser if you ask one to act for you
• allow a reasonable time to repay the arrears, with a practical payment plan where possible
• agree to change your payment date or payment method unless it has a good reason not to, and explain in writing if it refuses
• give you a reasonable time to consider any proposal
• not repossess unless all other reasonable attempts to resolve the position have failed

Options your lender must consider

The rules say the lender must consider whether any of these would suit your circumstances, with your agreement:

• extending the mortgage term
• changing the type of mortgage, for example to interest-only for a period
• deferring payment of some interest or capital
• reducing the interest rate, or charging simple instead of compound interest
• adding the arrears to the balance (capitalising them), but not automatically where the effect would be material
• using any publicly funded support it takes part in

It must also explain how any arrangement would affect your overall balance and how it will be reported on your credit file. If no arrangement is possible, it must allow you a reasonable time to sell the property yourself.

How does repossession work in Scotland?

The warning letters

Shelter Scotland describes two formal notices a lender may send:

• a calling-up notice, which states the full amount you owe on the mortgage and gives you 2 months to pay it
• a notice of default, which gives you 1 month to pay the arrears

You are not expected to find the whole mortgage in 2 months. The notice is a legal step, and it is the time to contact the lender, agree a plan if you can and get advice.

The pre-action requirements

Since 30 September 2010, the Home Owner and Debtor Protection (Scotland) Act 2010 has required lenders to take these steps before they apply to court (section 24A of the 1970 Act):

• give you clear information about the terms of the mortgage, the amount due, including arrears and any charges, and anything else you are in breach of
• make reasonable efforts to agree proposals for future payments with you
• not apply to court if you are taking steps likely to clear the arrears, or the full amount, within a reasonable time
• give you information about sources of debt advice
• encourage you to contact your local council

The section 24 court action

If things cannot be sorted out, the lender applies to the sheriff court under section 24 of the 1970 Act. It must send you a notice, send a notice to “The Occupier” at your home, and tell your council. The sheriff can continue the case or make any other order it thinks fit, but cannot grant the lender’s application unless it is satisfied the lender followed the pre-action requirements and that it is reasonable to grant it. The sheriff will look in particular at:

• the nature of and reasons for the arrears
• whether you can pay what you owe within a reasonable time
• what the lender has done to help you
• whether you are in a debt payment programme under the Debt Arrangement Scheme, where relevant
• whether you and anyone living with you could find reasonable alternative accommodation

If you put right what you are in default of before the sheriff grants the order (for missed payments, that means clearing the arrears), section 24(9) says the mortgage carries on as if the default had not happened.

What help is there to keep your home?

• Home Owners Support Fund. The Scottish Government runs two schemes. Mortgage to Rent lets a council or housing association buy your home so you can stay as a tenant. Mortgage to Shared Equity lets the Scottish Government buy up to 30% of your home, which you must pay back within 10 years. mygov.scot (updated 14 July 2026) says you may be able to get the fund if your lender will not let you lower your payments, you have paid less than the agreed amount for at least 3 months, you owe at least one monthly payment, and your home is under the property value limit for your area. Only an accredited money and debt adviser can apply for you. There is also help if you reach the end of your mortgage term and cannot repay what is left.
• Support for Mortgage Interest. If you get certain income-related benefits, you may be able to get help with your mortgage interest through the UK Government’s Support for Mortgage Interest scheme. GOV.UK says it is a loan, repaid with interest when you sell or transfer your home, and it does not cover arrears.
• Insurance. Check whether you have mortgage payment protection insurance that could cover payments if you have lost your job or are ill.

How do the Scottish debt solutions treat your home?

Dealing with your other debts can free up money for the mortgage, but none of the formal solutions stops a lender acting on its security if you do not keep up your mortgage payments.

• Debt Arrangement Scheme (DAS): you can choose whether to include mortgage arrears in your debt payment programme, and you do not have to sell your home. You repay your debts in full. The sheriff can take a DAS into account in a section 24 case. See the Debt Arrangement Scheme.
• Protected trust deed: your ongoing mortgage payments cannot be included, and mygov.scot says mortgage arrears can be listed but will not be written off. The equity in your home passes to your trustee, who may agree not to sell if you pay its value another way. A trust deed also has fees, affects your credit rating for 6 years and is listed on the public Register of Insolvencies. See your home and a trust deed.
• Sequestration (bankruptcy in Scotland): your share of the home can pass to the trustee. The trustee needs consent or a sheriff’s authority to sell a family home, and a sheriff can postpone a sale for up to 3 years. See your home and sequestration.

Which route, if any, fits depends on how much equity you have, your income and your other debts. An adviser needs to look at your whole situation.

What if your home is repossessed?

If the lender sells your home and the sale does not cover the mortgage, you still owe the difference, called a shortfall. Citizens Advice Scotland says the time limit for a mortgage shortfall is 5 years for the interest but 20 years for the main amount. See statute-barred debt in Scotland. Contact your council’s homelessness service as early as you can if you may lose your home.

Official sources

• FCA Handbook, MCOB 13.3: dealing fairly with customers in arrears
• Conveyancing and Feudal Reform (Scotland) Act 1970, section 24A: pre-action requirements
• Conveyancing and Feudal Reform (Scotland) Act 1970, section 24: application to court
• Shelter Scotland: repossession letters and what they mean
• mygov.scot: Home Owners Support Fund