The Complete Guide to Repossession
Repossession can happen to anyone. For those facing repossession it is an emotional and daunting situation that no one should experience alone. There are a number of steps you can take to prevent your home from being repossessed.
We have created this guide on repossession to help understand the entire process, which will help prepare you for the eventual outcome.
What is repossession?
House repossession is the legal process whereby the lender (a mortgage or loan provider) takes legal possession of a house or property when the owner fails to pay the agreed monthly instalments.
Repossession is a serious financial situation that can have a long term effect on your ability to obtain credit in the future.
How does repossession work?
Your lender must take a variety of steps, otherwise known as 'protocol', before they can start the repossession process. The first step in this process is making contact with you when your mortgage payment is late informing you that you are in arrears. Your mortgage provider must make an effort to discuss your financial situation with you and give you a chance to pay the arrears.
If you don't make any effort or are unable to pay your arrears your mortgage provider can issue repossession and take you to court. The time scales for when a lender begins proceedings varies depending on each lender's rules.
Whilst repossession is a daunting and unsettling prospect, remaining calm will make the process less stressful. Understanding the repossession process will help you manage the situation and remain in control.
1. Your lender will write to you
The first phase of the repossession process starts once a mortgage or loan payment is 15 days late. Your lender will contact you via telephone and letter to inform you how much money is owed. Responding promptly to the lender's calls and letters is very important. You shouldn't wait for an eviction letter to arrive before taking action. Talking to the lender sooner rather than later gives you the opportunity to be proactive and show the lender you care.
Remember, it is in your mortgage company's interest to continue to receive mortgage payments from you. Mortgage providers are in the lending business, not the property management business. Repossession is not a desirable prospect for the lender as they will likely lose money on it.
This phase is the time to reach out to your lender and explain your situation. Your lender is more likely to restructure or create a new payment plan if you are open and honest with them. They may be able to work out a payment plan to help you catch up with your payments and avoid repossession.
2. Your Lender files a request for a possession order
Your lender must have a court's permission before repossessing your home. They get that permission through an appearance in the local county court after submitting an application to the court. That application spells out the reasons why they believe that a repossession is appropriate.
The court will then send you (the mortgagee) a letter to notify you that a court date has been set. The letter will lay out all of the lender's arguments as to why a repossession is required. The letter will also include a defence form for you to fill out and return to the court. It is important that you take advantage of the form, fill it out, and send it back in a timely manner.
It is advisable to consult with a solicitor who may be able to help you complete this form, provide feedback on the lender's claim, and uncover information that could bolster your attempt to stay in the home. At the very least, the solicitor can help guide you through the process.
Additionally, you may want to use this period to put the home up for sale. When you receive a court notice that means it's clear that the lender is pursuing a repossession. The clock is ticking. If you think you can get enough via a sale to pay off the mortgage, you may want to list your home for sale to see if you can achieve a market related price. Alternatively, you could use a service like Fast Sale Today, which will buy your house with cash and complete within 28 days.
3. The court hears the case and makes a decision
It is important that you attend your repossession court hearing. The hearing is your opportunity to explain your situation and to give them a valid reason not to repossess. It's important to remember that no one, including the judge and the lender, wants to see a repossession happen. The judge is there to hear both sides of the story and make a decision on whether the repossession should move forward. If you don't show up, the judge will only hear the lender's side and will likely rule in their favour. If you do show up and make a compelling argument, there's a very good chance that the judge will postpone or dismiss the repossession request.
The hearing will take place at your local court and will last approximately 10 - 15 minutes. Your court may offer a "duty desk" that is manned by a specialist or a solicitor. The duty desk is a place where you can obtain free advice and guidance on your case. Arrive at the court early and see if a duty desk is available. It can help you be more prepared to make your case.
During the hearing, the judge will read over all documents, listen to the lender's argument, and then listen to your argument. You should be prepared to succinctly and professionally explain why you've fallen behind with mortgage payments and how you plan to get caught up. If you're working with Fast Sale Today or have some other plan to sell your home, be sure to discuss that.
At the end of the hearing, the judge will make one of four rulings:
- To repossess the home
- To delay the repossession
- To postpone the case for a later date
- To dismiss the case to repossess
If the judge orders a repossession, you will be given a date by which you must leave the house. You generally have 28 days to vacate the property, but it could be more or less. If you're haven't left by the ordered date, the lender can apply for a warrant to have your local bailiff remove you from the property.
4. Your lender will sell your home
After the repossession, your lender will try to sell the property. Any money they receive will go towards paying off your mortgage. However, during this time, you are still responsible for making mortgage payments. You'll also be responsible for paying any remaining mortgage on the loan.
It's also possible that the lender may sell the home for less than the outstanding balance. In this case, there will be a remaining balance after the home is sold which you will be responsible for paying.
Many people make the mistake of thinking that their financial obligation will end if the home is repossessed. That's usually not the case. The payments are likely to continue, as are the letters and phone calls.
What is voluntary repossession?
Voluntary repossession occurs when you can't pay your mortgage and you take the decision to hand your keys to your lender. Although you might be tempted and you might think that giving your property to your lender will take a weight off your shoulder this isn't the case. Handing over your keys should be the last resort. It's important to seek professional advice before you consider voluntary repossession. There are a number of considerations you need to take into account before making a decision you may live to regret.
It's important to be aware that you are still responsible for the property during this time and you are expected to keep up with your repayments.
Lenders generally sell properties at auction so you might not sell your house at the price you desire. Regardless of how much your property is sold for the full amount is paid to your lender.
How to avoid repossession
You may not know what kind of arrangement to propose to stop repossession. The short answer is that anything that helps you get caught up is better than not proposing anything. However, there are some common proposals that are seriously considered by lenders. Here are five of the most effective:
Temporarily change your mortgage to interest-only
This will lower your monthly payments and may allow you to regain your financial footing. A lender is likely to only consider this if you can show that your financial challenges will only be temporary.
Add your arrears to the full-term of the mortgage so you can repay them through an increased monthly payment.
Lenders will often consider this, especially if your financial situation is likely to improve in the near future. You'll have a higher payment, but that's better than going through repossession.
Take a mortgage holiday, if your lender allows it
Some mortgages are flexible in their repayment terms and allow homeowners to take breaks from paying. Look into whether your mortgage allows for this. If so, it could be just what you need to overcome your financial challenges.
Take out a claim against your mortgage payment insurance policy
If you purchased mortgage payment insurance, you can claim a benefit to help support your mortgage payments. If you have a claim in process, your lender can't start repossession proceedings.
Rent out a portion or all of your home
This may not seem ideal, but it will provide you with immediate income to help pay down your mortgage. Your lender will likely view this as a legitimate effort to catch up on the arrearage and may delay any repossession proceedings.
If your lender rejects your proposal, don't give up. You may just need to change one or two aspects of your proposal. Call the lender and ask why they rejected it and what you can do to get an arrangement worked out. Sometimes, it's just a matter of getting your proposal in front of the right person at the lender's office. Keep trying. They least that can happen is that you stave off repossession for a few more months.
Cut down on your monthly expenses
Although this sounds obvious but it's surprising how many people don't limit their expenditure when they run into money difficulties.
The Money Advice Service have a couple of useful budget tools that help you work out exactly how much you spend each month and how much you have left over after you've paid your bills.
A house repossession hearing can be intimidating, especially if you don't have much experience in a courtroom. Knowing and understanding your rights could mean the difference between you losing your home.
Many homeowners who face repossession often skip the hearing because they're afraid of what might happen. Others may skip it because they're embarrassed and don't want to be recognised at the hearing. While these concerns are valid, it's still critical that you attend the hearing. It may be your best opportunity to delay or stop repossession efforts.
Help with Repossession
No one should deal with repossession alone and expert help should be sought. There are experts out there who are there to provide free advice on repossession and present you with your options.
Don't wait until you have been taken to court to get help with repossession. Seeking legal advice when your money problems start will put you in a much better position.
There are a number of money advice companies out there who provide free and impartial advice like the Money Advice Service. You can also pop into your local Citizen Advice Bureau who will provide you with free independent advice.
What happens after repossession?
Whether you have been evicted or have opted for voluntary repossession you will need to find somewhere else to live. There are a number of options but this will depend on the outcome of your repossession and your financial situation. Repossession can have serious effects on your ability to obtain credit so this could restrict the options available to you. We have produced a supplementary article which explains how repossession affects your credit rating which we would advise you to read.
Obtaining a new mortgage
Whilst it's not impossible to buy another property, be prepared that it will difficult to obtain a new mortgage. You can also expect to pay much higher interest rates. It's important that you declare to the lenders that you have been repossessed and explain the reasons why.
Shared ownership is another good option that we recommend you explore. You can find your local help to buy agent here.
This will solely depend on whether the landlord is prepared to rent to you. Again it's important to be open and honest with the landlord and explain your situation. There are a number of checks that landlords can carry out during the application process so it's best to be honest because you will be caught out.
Council Housing and housing benefits
Your local council have a duty to help you if you are due to be homeless. We would advise that you contact either your local council or Citizen Advice Bureau to see how they can help you.
There are a number of homeless charities out here like Shelter that provide free legal aid and advice on what to do if you are or about to be homeless.
Repossession is daunting, there's no doubt about it, but if you are facing repossession it needn't be the last option. There are ways you can prevent repossession or you can attempt to sell your house to alleviate the issue.
Fast Sale Today's experts specialise in purchasing properties for cash in as little as 28-days. If you are facing repossession and feel that this could be the solution for you feel free to visit our site and contact us.