We look at what you need to do if threatened with repossession proceedings.
Of all the reasons to sell a house, repossession is one of the most urgent. There were nearly 7,000 repossession claims in London alone during 2013 — a number expected to increase in future years. In the same year, around 1.75 per cent of all home loans in Britain were in arrears. Knowing how to stop repossession of your home will give you more time to improve your chances, get help, and address any underlying issues, avoiding eviction.
If you are in arrears, you run the risk of court action in the county court and having your home repossessed by your mortgage lender to settle your debt, a highly stressful situation that can leave you feeling helpless.
Don’t ignore the warnings!
The moment lenders notify you of an intention to begin repossession proceedings, you must act quickly and decisively. Unfortunately, too many vulnerable homeowners ignore what is happening and hope the issue will go away. However, this is probably the worst thing you can do in this situation.
By being proactive and approaching your lender, there may be some lower payments you can send or other solutions that are agreeable to everyone concerned. After all, mortgage providers hate repossessions: costly, time-consuming and often lead to unpaid debt. Don’t leave a few missed payments to develop into something much more severe and risk receiving eviction letters. At worst, if you sell your home before repossession, you may benefit from any equity in it.
Don’t panic if threatened with repossession.
Mortgage lenders cannot just swoop in and turf you out of your home/repossess the house — regardless of how severe your mortgage arrears. Lenders must send you notification of court action and obtain a court order before the eviction process. Then, a court must hear the case against you. A court will then decide whether to grant an eviction order taking into account all the circumstances.
The court’s responsibility is to protect the mortgage provider’s financial interests while avoiding a breach of the peace. Therefore, you will get your chance to improve the position and argue your case before a Judge. Of course, things may not go that far if you reach a mutually agreeable repayment agreement with your lender. Check with the court on how to appeal repossession if things don’t go your way.
How can I stop my house from being repossessed?
The first step is to contact the mortgage provider by phone. It would be best if you acted quickly and decisively to improve your chances, and writing will take up time you don’t have. Next, speak to someone who is authorised to reach a repayment plan. However, there are several options open to you at this stage, including:
- Add the arrears to your mortgage balance and maintain some acceptable payments.
- Request a mortgage holiday (if the terms and conditions of your mortgage allow it).
- Cash in an endowment policy.
- Transfer to an interest-only mortgage to reduce your monthly payments
If these options are not available to you, there might be an opportunity to agree on a payment plan to clear your arrears. However, if you’ve fallen behind in the first place, the chances are you won’t be able to make arrears repayments on top of your regular monthly repayment.
If you’ve exhausted all your options and are unable to send any more payments to bring your account up to date, you may need to consider more drastic action:
- Rent out your house, and use the rental income to pay your mortgage (and the arrears)
- Agree to take in paying guests
- Sell your home fast.
You should call and discuss all your options with the lender. If, for instance, you decide to sell your home, the lender may give you more time; therefore, consider all possibilities. However, the lender may choose to decline all of your suggestions, in which case they will notify you of an application for a court hearing for a house repossession.
Selling your house fast to avoid repossession.
Selling a property on the open market may not give you the certainty you need. In some UK areas, selling property takes an average of six months, from an initial listing to completion. However, even if you receive an offer for your property relatively quickly, there is still a wide range of issues that could stall or stop the sale completing.
Quick house sale companies make an offer based on the current value of the property. They have the cash and the infrastructure ready to expedite a purchase — and give you certainty regarding price and timescale, possibly what you need to stop repossession by your lender. If the mortgage lender allows you time to sell, consider all your selling options to maximise the sale price and avoid your home repossession.
What happens if the repossession progresses?
If you can’t improve matters and satisfy your lender that you can rectify the situation, a suit will be filed in court, asking for an order of repossession, and you face eviction. You will receive notification of the hearing directly from the court. You will have the opportunity to lodge a defence, but you should seek legal or professional advice before doing so.
The case is going to court. What next?
You will usually need to appear in court if you wish to lodge a defence. A legal representative will talk you through the repossession process and how to stop the repossession of your home in court. One of 3 things may happen as a result of a repossession hearing:
- First, the judge may postpone or dismiss the case.
- The court may grant a suspended possession order, allowing you to stay in your home as long as you stick to certain repayment conditions.
- Your property may be repossessed and sold to clear your debt.
Note: If the sale of your home doesn’t fetch enough money to clear your debt, you will still be liable to pay any outstanding balance.
If the judge orders the repossession of your home in the court hearing, you will have between 28 days and 56 days to vacate the property. The legal costs of your lender will add to the amount you owe. If you don’t move out of your home within the allotted time frame, the court appoints bailiffs to evict you forcibly. Again, the bailiff’s costs will add to your debt.
What happens if your house gets repossessed?
- You will continue to be charged loan interest on your home loan until the sale of your home is complete.
- Lenders will sell your home to clear any outstanding mortgage plus any arrears.
- If there are surplus monies left over after your mortgage repayment and fees, this will be refunded.
- If your home’s sale does not cover what you owe, you must pay this amount back separately.
- Residual debt may pass onto a third party, which means you will owe money to that individual or organisation.
If you need information on avoiding repossession/eviction in the UK, you should seek advice from a solicitor or a property expert. Your lender has a responsibility to communicate with you throughout the process, so you need to know your legal position from the outset.
For more help to stop repossession and avoid court action, contact the Citizens Advice Bureau (CAB) for repossession help (England and Scotland).
