For most people, owning their own home is something they dream of or even expect to have in the future. But the dream could turn sour if they find themselves in financial difficulty. Changes in circumstance like job loss or illness could mean there is not enough money coming in to cover the mortgage and bills. So what do you do if you are faced with repossession.
House repossession can have a devastating effect. Not just because of the upset of leaving a much loved home, but also because it will affect your credit rating and make it extremely difficult to borrow money or buy another property in the future. The repossession will remain on your credit report for up to six years so taking action before repossession occurs is vital in ensuring that it doesn’t have a long term effect on your credit rating.
If you have missed mortgage repayments it is vital to seek advice to try to postpone or stop your home being repossessed. It might be possible to come to an arrangement with the lender that lets you keep your home while maintaining some payments to them.
Don’t think you can cut your losses and run. Handing the keys to your mortgage lender will not solve your problems, as you will still be responsible for mortgage payments until the property is sold. You will also have to make up any shortfall if the sale doesn’t make enough to cover what you owe.
If you are eligible for legal aid you can get free advice from Civil Legal Advice, a government funded advice service.
You can also get free advice from:
- Citizens Advice
- National Debtline
Before a mortgage lender can repossess your home, they must:
- Tell you how much you owe
- Consider a request from you to change your repayments
- Respond to any offer of payment you make giving reasons if they turn down your offer within 10 days
- Give you a reasonable amount of time to consider any proposal they make
- Give you 15 days written warning if they plan to start court action, telling you the date and time of a repossession hearing
- Let your council know within 5 days of getting a notification of the date of the court hearing, in case you need to apply to the council as homeless.
If your lender starts a repossession action against you, the court will send you a defence form which you can use to explain why you think the lender shouldn’t repossess your home.
The judge makes the final decision so it is important to turn up to the court hearing or it is likely the mortgage lender will get the right to evict you and take possession.
If your home is repossessed your local council must give you advice to help you find a new home.
Getting a new mortgage in the future will be difficult after repossession. You must tell any new mortgage lender that your previous home was repossessed. If you still owe money to your previous lender, they may be able to claim some of the proceeds of your new home when you sell it.
One solution to the threat of repossession is to sell your property to a quick house sale company. Selling quickly means you can release money to pay off arrears before court proceedings are started. If the lender agrees to remove the arrears from your record your credit rating will not be affected.
Whatever the best strategy is for you, it’s imperative to have a plan of action and to act quickly before you are left in a situation you can no longer control.