Steps To Stop Repossession
If you’re facing repossession, our home buying team are here to assist. Our guide contains useful tips to help you stop repossession.
The home. It’s your shelter, your family’s hub and the source of countless happy memories. Unfortunately, financial difficulties can befall anyone at any time and jeopardise the sense of security that a home represents. When circumstances make keeping up with mortgage payments impossible, your lender will soon take notice, setting in motion a series of stressful and potentially disastrous events. In some cases, repossession may even be a possibility.
There’s no denying that, as a homeowner, being faced with repossession is one of the most terrifying situations imaginable. Any number of occurrences in life can lead to mortgage payments being missed, and too many missed months will lead to threats of court proceedings coming from your lender. If you’re facing the prospect of losing your home, don’t panic. It’s often a lengthy process; there’s usually plenty of time to take steps towards regaining financial stability and reducing the likelihood of repossession.
We’ve put together another in our series of guides to help you when interacting with your lender, managing your financial situation and trying to stop the threat of repossession. If you act smart and make the right moves, your home can remain yours for the long run.
Without positive action on your part, the repossession process will consist of the following steps:
Contact From Your Lender – Your lender will contact you soon after a missed mortgage payment-typically after a two-week grace period, but this is not a legal requirement. In this conversation, you’ll discuss your plans for repayment, and the possibility of court action will be presented.
Pre-Action Protocol – Before a lender can lawfully pursue legal action, they must follow a set of procedures known as the pre-action protocol. These procedures ensure that a lender taking matters to court is purely a last resort and include presenting you with the following:
- The total outstanding on the mortgage
- The total amount of the missed payment(s)
- Details of any interest or additional charges that have been, or will be, added to the mortgage
- Information on the payments made towards your mortgage over the previous two years
Lenders are required to direct you to appropriate support services, including those in government and independent organisations. They should also consider your specific situation and the events that led to the overdue payment(s). Put simply, lenders must explore every opportunity for helping you regain financial stability before they can turn to the court. For more information on pre-action protocol for outstanding mortgage payments, you’ll find more information on Shelter Legal.
Court Action Begins – The lender will send a repossession claim form to the court in addition to any other documents relevant to their claim; you, as the defendant, will also receive a copy of these documents (sent to you by the court itself). Additionally, you’ll be given a Defence Form which lets you outline your circumstances, in detail, to the court prior to the hearing. Obviously, it’s vital that you fill this out with all the information relevant to your defence. Finally, you’ll be told the date, time and location of the case’s hearing.
At the Hearing – Here, you and your lender’s representative(s) will explain your respective cases to the judge, who will come to a decision on the fate of the property in question. Either the judge will dismiss the case-and your home won’t be repossessed-or they’ll grant a repossession order, meaning you’ll be evicted from your house at the lender’s discretion.
Eviction – If there is no possibility for you to feasibly keep up with the payments, and the judge grants the order, a date will be set for your eviction from the property. You must have left the premises by this date, although there may be opportunities to reclaim your possessions if left in the house after that date.
Create a Repayment Plan
Creating a plan for settling your debt is not only useful, but also incredibly helpful in helping build your case in conversations with your lender. There are several parts to developing a repayment plan:
Gather Evidence – Compiling all of the evidence that proves your financial situation will inspire faith on the part of your lender, provide context to the rest of your repayment plan and help your case should proceedings be taken to court. This body of evidence can include bank statements, redundancy documents if you’ve lost your job, documents detailing benefits claims or anything else that helps illustrate your personal situation.
Budget – Reducing your outgoing costs will leave more funds to channel towards your outstanding mortgage payments. Take a look at your monthly outgoings – food, leisure, utilities and such – to see where you can cut costs. If it’s a shared house, a team effort will be crucial to keeping costs to a minimum; speak to your family about the importance of remaining frugal in this cash-strapped time. It might be necessary to make difficult sacrifices in order to save money, but when the alternative is repossession, there are few sacrifices too great.
Tracking your finances will be an important part of this process too: you’ll need to prove to your lender and possibly the judge that your expenses are markedly lower as a result of your budgeting efforts.
Increase Your Income – Increasing your earnings, in addition to helping pay off your arrears, can help prove to your lenders and the judge that your mortgage is a top priority. Taking a second job or working overtime at your existing job can be fantastic – and demonstrable – ways of boosting your income.
Seeking benefits (see "Universal Credit" further down this page) can be another method of increasing your income. There is, however, a waiting period associated with the benefits process, although lenders will likely be willing to wait if you explain this to them.
Draw Up a Repayment Offer – Regaining financial stability is one side of the coin, creating a plan to pay off your arrears alongside the regular mortgage payments is the other. You may choose to split the arrears up into bite-size chunks every month for the duration of your current mortgage plan; you might opt to pay them off in larger amounts; or you may even negotiate an extension of your mortgage term.
Steps for stopping repossession
The options for homeowners in difficult financial situations are numerous. Before you give up hope and hand the keys over to your lender (never an advisable choice), ensure that you’ve adhered to the following advice.
Communicate With Your Lender
As soon as your financial situation makes paying your mortgage difficult, be proactive and discuss the situation with your lender. Banks and mortgage providers stand to benefit more from receiving regular mortgage payments than they do repossessing your house. If you reach out to them, and don’t wait for them to contact you, they’ll be more likely to regard you as a trustworthy and responsible borrower. This means that, in future discussions, they’ll be more lenient and likely to make concessions for you.
On top of this, you should also explain to your lender how you’re looking to rectify the situation. Perhaps you’ve started a new job and will settle the amount on payday; maybe you’re actively in the process of seeking financial support. Whatever your solution, if you’ve got a plan, most lenders will likely be happy to grant you time to carry it out.
Seek External Support
Contacting external support systems should be one of the first things you do after falling into arrears. Organisations like Citizens Advice, the National Debtline, Shelter or even the local council can help highlight the best way forward for your situation. Also consider hiring a solicitor; you may even be eligible for legal aid to help cover the associated costs.
Seek Out Support for Mortgage Interest (SMI)
While it won’t help cover the cost of the mortgage itself, Support for Mortgage Interest (SMI) can help you with the interest payments on a mortgage. Typically, only homeowners receiving a qualifying benefit will be eligible for this (find out if you’re eligible here), but it’s worth considering this scheme if you fall in that category.
SMI is paid as a loan, with interest, that you’ll repay when upon selling your home. Voluntary payments can also be made towards this loan if you’re in a financial position to make them. Unfortunately, regardless of your benefits situation, possessing more than £16,000 in savings or owning multiple residential properties makes you ineligible for the scheme.
Pay What You Can
Even if you’re unable to repay the outstanding sum in full, repaying what you’re able to afford will show your lenders (and the judge) that you’re taking steps to improve the situation. Plus, it proves that your mortgage troubles are a priority which will help build trust with your lender.
Seek Help From Friends and Family
If there are high levels of trust among you and your friends/family, and they’re in a financial position to offer it, consider seeking an interest-free loan or even a monetary gift from them. This advice won’t be applicable to many people—for a number of reasons—but never underestimate the support system provided by family and friends.
Mortgage Payment Protection Insurance (MPPI)
The phrase "payment protection insurance" may cause eyes to glaze over, but this isn’t that same thing is PPI; it could be a lifesaver for you in this current situation.
MPPI is an insurance scheme that promises to cover the cost of your mortgage should you lose your job or become too ill to work (or both, depending on the specific policy). If these are the reasons you’re facing repossession, check if you’ve applied for MPPI in the past. Claiming is often subject to a 30 to 180-day waiting period, although lenders may be willing to delay court action if you inform them of this waiting period.
Apply For Universal Credit
If you’re over 18 (16/17 in some situations), living with a low monthly income and possess less than £16,000 in savings, you may be able to claim for Universal Credit and receive help paying off your mortgage. You can start the process on the government’s website by providing them with your National Insurance number, financial information, housing information and details of any dependents (children, for example).
Within 10 working days of your online application being processed, you’ll be asked to attend a live interview with Jobcentre Plus to discuss your situation and the terms of receiving Universal Credit. Typically, you’ll have to fulfil a set of requirements, outlined in the interview, known as Claimant Commitments to receive the aid each month. These usually include applying for jobs, attending training courses and keeping the relevant authorities informed of changes to your circumstances.
After being approved for Universal Credit, it will usually take around 5 weeks to receive your first payment. For those in mortgage arrears, 5 weeks may be too long to wait. Thankfully, you can apply for an advance on your first payment which will have to be repaid over time.
Sell Your Home
While it’s far from ideal, in some circumstances, if, for example, your financial situation is unlikely to change and you have an alternative place to stay, it may be a good idea to look at selling your home. This way, assuming your house’s value covers the outstanding debt, you’ll be able to sell the house on your own terms and almost certainly achieve a larger sum for it than if the lender was to sell it as a repossession.
If the lender repossesses your home, or you willingly pass the deeds over to them, the house will be sold as a repossession. That means that it’ll be sold often cheaply to move as fast as possible. In that circumstance, there’s potential for the house’s sale price to not cover the cost of your mortgage, meaning that you’ll both be without a home and still in debt. Additionally, you’ll still be required to pay mortgage, insurance and various other fees while the lender has your house on the market, including estate agent’s expenses; by selling the house yourself, before it’s repossessed, you avoid this.
Rather than putting your home on the open market, subjecting yourself to the numerous fees, wait times and untold stress that come along with that, our residential house buying service can buy your home quickly and without hassle.
Rent Out Your Property
Renting out a room in your house (or your entire property, if you’ve got an alternative place to stay) can be an ideal way to increase your income and cover the cost of your mortgage arrears. Before you do so, it’s important to make sure that the additional income will be enough to meet the requirements of your mortgage repayment plan and that you are permitted to rent out a room.
Questions you may have regarding repossession
✅ Should I ever choose voluntary repossession?
In almost any conceivable circumstance, the answer to that question is no. Leaving your property in the hands of your lender to be sold will often result in a lower ultimate sale price, which may not even cover your outstanding debt. Additionally, while your repossessed property is on the market, you’ll still be liable for mortgage payments, home insurance and any other fees you’re currently paying.
In almost all circumstances, it’s better to sell your house on your own terms than leave it in the hands of your lender. LDN Properties’ residential property buying service can provide fast and fair house sales without any fees.
✅ What happens to my debt if repossession occurs?
If the lender repossesses your property, it will be placed on the open market and sold for the highest possible price (which is still likely lower than market value). The funds from the sale will be put towards paying off the mortgage, any interest and all arrears; legal fees; repair and maintenance fees; and the cost associated with selling the house. After all debts-including the ones secured to your home-are paid off, any remaining funds will be paid to you.
If there are debts remaining, you will still owe the outstanding amount to your lenders unless they decide to write the debt off.
✅ How long does repossession take?
The process from missing a mortgage payment to losing your house is a long one; even if a repossession order is given by the judge, it can be anywhere from 28 to 56 days before it comes into effect. All told, the entire process can take anywhere from 6 to 12 months. This depends entirely on multiple factors including your situation, how cooperative you are with the lender and what sort of efforts you make towards remedying the situation.
✅ What are the types of repossession?
Outright Possession Order – This gives the lender, after a period decided by the court, complete legal write to own and sell your home.
Suspended Possession Order – This means that your continued ownership of the home is dependent on regular payments towards your mortgage. Without payments, you will be evicted.
Money Order – With this order, you remain in your home and the lender cannot evict you; however, if you fail to keep up with payments, possessions can be removed from your home and sold. On top of this, money can be taken from your wages to cover the payments.
Time Order – This sees the judge adjusting your mortgage in terms of the regularity of payment and the interest rate. If you fail to keep up with payments, even with the adjusted time scale, you can be evicted.
✅ Is the Judge's Decision Final?
Not necessarily. If you feel like mistakes were made or your case was improperly presented during the initial court hearing, you can request to appeal the judge’s decision. The appeals process is normally started by consulting with either the original judge or, in some cases, a more senior judge. At the appeals hearing, a judge will either maintain the original decision, come to a new decision or call for a new hearing entirely.
If you aren’t earning low wages or receiving benefits, you may also stand to pay additional fees for the appeals process.
Other repossession resources
The threat of legal action from your lender truly isn’t the final word when it comes to the fate of your house. Various resources available to homeowners make repossession an avoidable circumstance, and if proceedings do escalate to court, there are still chances to defend your case and appeal any decisions made.
For more guidance and information regarding mortgages, arrears and repossession, visit the following websites:GOV.UK The Money Advice Service Shelter Citizens Advice
For any additional queries regarding mortgage arrears, the threat of repossession and the ways we can help, please contact our expert team at LDN Properties. We’d be happy to discuss your situation.
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