How to avoid repossession of your home
Today, we’re going to be having a look at what home repossession really is, and how you as a homeowner can avoid it.
What Does Repossession Really Mean?
It makes sense to firstly, take a look at what possession really means.
- Repossession occurs when a homeowner is in mortgage arrears that they can’t afford to pay.
- It’s known as one of the most frightening situations to be in, as with the bank checking up on you frequently, you run the risk of losing your home.
- If repossession occurs, the court take charger of your home and it’s then sold on.
- No one wants to repossess a property – contrary to how it might feel.
- Burying your head in the sand is the worst thing you can do – as the problems won’t just go away.
Remember, however, that there is help available! It’s not the end of the line if you’re in mortgage arrears, and we’re going to be covering some of the options that could help you to avoid the repossession of your property.
What is The First Step To Stop Repossession?
The first step in avoiding a property repossession order, is to act immediately.
- It’s a horrible place to be. You can feel like a deer in the headlights with nowhere to run – but the first step in avoiding things going too far, is to act as quickly as you can.
- Remember, that the longer you leave things as they are, the worse they’re likely to get. Payments will build up, and your arrears will increase.
- If your home hasn’t yet been repossessed, then the good news is that all hope is not lost! Speak with your mortgage company as quickly as you possibly can in order to eliminate the possibility of you being made homeless. This is worst case scenario, particularly if you have youngsters and family members who are reliant on you.
- Before any repossession proceedings commence, try and see if there’s a deal you can make with your mortgage company. It could be extending the term of your mortgage, or changing your payment structure in order to help you make up for arrears.
Remember, time really is of the essence in this scenario.
Can I Get Professional Help?
Finding someone to speak to is a crucial step when confronting the possibility of home repossession.
- There are organisations such as Shelter out there, that are easily accessible online. They can offer help, support and advice for those who may be facing repossession. They also have helplines so that you can speak to someone directly who knows the process and methods of prevention.
- These organisations will also explain about the possibility of applying for legal aid, which you could be eligible for depending on your situation.
- If you are entitled to legal aid, then this could help you with possession proceedings and court cases.
- You could also look into declaring bankruptcy – but be mindful that this impacts your credit score greatly.
Will My Lender Help?
Your lender is the person who you’re likely to owe mortgage arrears to in the first place, so surely, they can help, right?
- As we said, one of the first things you should do if you’re having trouble with your mortgage payments, it contact your lender.
- It’s law in the UK that every single lender must follow the rules of pre-action protocol – including their duties before court action is taken on you.
- Before they try to possess your home, they have to discuss your finances with you, and give you a reasonable chance to pay your arrears. This is why we say do NOT ignore the situation! The sooner you act and try to work with your lender, the less chance you have of the scenario escalating.
- The have to let you know the total amount of arrears you owe, and what the monthly instalments are.
- They also have to inform you of how much you’ve got left to pay on the mortgage overall, details of your payments over the last two years or so and any interest charges that may be added on top of your arrears.
- Remember, that paying a little is better than nothing. If you can pay something off your arrears and prove to your lender that you’re taking action, it helps to rebuild the trust between you and ultimately could prevent them from taking court action.
But remember, they can’t help you if you don’t ask them to. Communication is key.
Will My Lender Be Willing to Negotiate my Mortgage Terms?
As we mentioned previously, banks and lenders don’t want to have to repossess your property. It really is a last resort.
- Ask your lender about negotiating the terms of your mortgage. If you don’t ask, you don’t get.
- Two options you could consider are asking to extend the term of your mortgage, or even to change the type of mortgage that you have.
- Another option would be to try and negotiate reducing your monthly payments – or even enquire about taking a payment holiday to help you get back on your feet.
- The definition of payment holiday, is very simply a gap in which you don’t have to pay your monthly instalments. This can be hugely helpful in increasing your finances and helping you to pay more in the future.
- Another potential negotiation the two of you could make, would be the capitalisation of arrears. This means that the mortgage company would add whatever you owe in arrears to the total balance of your mortgage. Your arrears then become something called “capital owed”.
- The easiest of these is, without doubt, likely to be changing the terms of your mortgage, however it’s well worth discussing all of the options available.
Remember that different lenders are likely to have different terms and conditions, and therefore will react differently to reactions and negotiations. One thing it does prove to them, however, is that you’re taking the situation seriously, and you’re willing to work with them to pay what you owe. That counts for something.
Is There a Company Out There that Helps with Mortgage Payments?
You can get help with rent payments in certain situations, so is it possible to apply for help with your mortgage payments?
- The answer is, yes. If you’re seeking certain benefits, then there is a possibility that you can apply for help with your mortgage payments.
- The name of the organisation you have to go through to find this out, is the SMI – also known as the Support for Mortgage Interest.
- The biggest issue with this, is that it can take as long as thirty nine weeks for these benefit payments to kick in.
- However, so long as you explain to your bank you’ve made the claim and have evidence of it, then they’re likely to accept this.
The SMI is only available for those already claiming certain benefits, so if you do, then it’s worth doing your research to see whether or not you’ll be considered eligible for this.
Are There Any Other Helpful Organisations I Should Know Of?
We’ve covered a fair few bases, but should these fail, then it’s good to know that there are in fact other helpful organisations out there.
- A property solutions company could be the answer if none of the other options we’ve listed are viable for you personally. These can be organisations or individuals.
- This form of help usually includes the company, organisation or individual taking over the mortgage payments from you, which also includes the arrears being sorted out in the process.
- A property solutions expert would speak to your bank – with your permission of course. It’s only possible for them to do this with your say so.
- Another possibility is that you can be paid out from the deal you make with a property solutions company too. This is, however, dependant on the amount of equity you have left on your home, after the mortgage and the arrears have been taken off.
There is a wealth of information available about the option of property solutions experts online, so it’s worth having a look and doing some research if it sounds like it could help you.
Is it Just the Lenders Who Can Repossess My Home, or Can the Bank too?
It’s true that if none of these options work for you, then lenders can repossess your property. But is it also possible that the bank could become involved too?
- Under UK law, in order to regain the sum you owe, lenders are able to repossess your home.
- However, if you then don’t agree to the repossession of your home, the lenders are likely to take you to court. The unfortunate news here is that if you’re taken to court by the lender or the bank, then it’s more likely that they’re going to win than you are. This is so long as they’ve followed the pre-action protocol.
- Likewise, if you’re taken to court because of refusing repossession, then you’re also liable to pay for court and legal fees.
- The lender taking you to court doesn’t necessarily signify the end of the process, but it could be too late for reasoning with them. It’s pretty safe to assume that the overall result of the court case is likely to be an order for repossession.
After this, it’s likely you’re going to have to start looking for somewhere else to live.
If My Home is Declared Repossessed, What Happens Next?
Hopefully it would never come to this, but if your home is declared as repossessed, it’s important to know what is going to happen next.
- Once your home is repossessed by the bank, the lender has a legal obligation to ensure it’s then sold on. Unfortunately for them, however, it’s rare that a repossessed property sells for its true market value.
- The vast majority of the time, the sale of a repossessed home is considered to be a “forced sale” and therefore is more likely to be sold on auction than in a traditional way.
- This means that the property is likely to sell for a lot less than it would had the overall sale process been traditional.
- The money made from the sale is then usually used to pay off the mortgage, the loan, any arrears or legal fees that are left over. If there is a surplus – which isn’t always likely – then the bank will return it to you in due course.
- The problem is that the proceeds aren’t always enough to clear what you owe the mortgage company. If this is the case, then you’re still responsible for paying what you owe. Furthermore, interest is likely to gather on these costs as well.
- This is often referred to as a shortfall.
- Dependant on your personal circumstances and that of your lender, they may pursue seeking repayment from you. There is a chance, however, that they may not.
- If they do wish to recover the amount, however, they must notify you within the first six years.
- These shortfalls happen when the property is sold for less than the amount owed on the mortgage and arrears at the time of repossession.
- The shortfall itself is also affected by legal fees, estate agent selling fees, and of course, court fees.
Any money that’s left on your mortgage that you owe the lender, is called a mortgage shortfall.
Will Repossession Stay on My Credit Report Forever?
A big concern amongst those facing repossession, aside from the obvious loss of their home, is whether or not repossession will always stay on their credit report.
- According to reliable sources, the average amount of time that a repossession stays on a credit score, is seven years. These seven years usually begin from the first missed payment, or the original date of delinquency.
- Although it will impact your credit rating for seven years, the level of impact does decrease over time.
- Be mindful however, that after the seven years, it’s still a good idea to declare what happened in the past with your repossession when applying for a loan or credit card.
- It’s always a good idea to seek independent advice if you’re not altogether sure on whether to declare your previous repossession or not, as it will be dependent on the loan that you’re applying for etc.
- It’s always best to do your research before deciding on this.
So the answer is, no, repossession doesn’t stay on your credit report longer than seven years – but it can affect you for longer if you choose to or are advised to declare it on applications. Sometimes, it’s better to be upfront than to have these things discovered later down the line.
We know, it’s a lot of information to take on board. But if you take anything away from this post, let it be:
- The longer you leave it, the worse it gets.
- Speak to your lender as soon as you possibly can. The sooner, the more likely you are to be able to come to an agreement on payments and keep the dispute out of court.
- There is help out there – even when the situation is taken as far as court. It’s not technically over until the repossession order is made and carried out.
- Evaluate all of your options, and make a decision that’s right for you.
Remember that no matter what, you don’t have to do this alone. There are a multitude of free advice services available at your fingertips, so utilise them. Don’t wait until it’s too late – because once the chance is gone, it’s gone.