How To Stop Repossession Of Your House
If you’re struggling to keep up with mortgage repayments due to financial difficulties or you’re already in arrears, it’s important to know how you can avoid repossession of your home.
In this article
What is repossession?
Repossession is when your mortgage lender secures a court order to take over the possession of your home.
When you take out a mortgage to buy a property, that lender effectively owns a financial stake in your home – and this decreases over time as you pay off the debt. However, if you begin to miss repayments, mortgage lenders can then take back full possession of the house to sell it in order to recover monies owed.
This process would involve court action, and bailiffs attending your property to evict you. However, it’s definitely a last resort – repossession usually occurs after three or more consecutive missed payments, and lenders will always try to arrange an alternative repayment plan with you to clear your incurred arrears and costs. Although, lenders who provide finance to high-risk candidates (those with low credit scores) will usually take action after two missed payments.
If it’s confirmed that your house will be repossessed, or you’ve just found out this is a possibility and you’d like to know how the stages of the process work, you can find the repossession process outlined below.
Please note that you should continue to propose alternative, reasonable ways to repay your arrears and mortgage to your lender all throughout the repossession process – it’s possible they will agree to a repayment plan at any point up until the day of eviction. Remember, repossession is a last resort for lenders.
- Missed payments
When you miss a mortgage payment, your mortgage lender will then write to you concerning your arrears. If you continue to miss payments, your lender will continue to attempt to contact you about your payments.
You should negotiate at this stage and discuss your circumstances with your lender. You should follow the above advice and attempt to settle a repayment plan that is manageable for both you and your lender.
If the lender rejects your proposals, you’ll be issued with a second warning about your arrears, which will outline their plans to begin court action in order to repossess your home.
- Court order
Your mortgage lender will apply for a court order to repossess your home. This application will detail why a judge should grant the lender possession of the property and costs £325 to submit.
If the lender is not claiming rent arrears, they can apply for an accelerated possession order which costs £355, which would see you evicted even sooner.
- Court hearing
You will receive a date in which your case will be heard in court. It’s imperative that you attend, so you can explain to your mortgage lender and the judge the reason for your missed payments and the proposals you have suggested to the lender.
The judge will evaluate the evidence provided by both you and your lender. This is why it’s important that you have made written suggestions about how to settle your arrears prior to this point, as this will help the judge see that you have tried all you can to remedy the situation out of court.
- Possession order
If the judge rules in your favour, you will have to sign to a new repayment agreement – if you don’t stick to this, you will be evicted.
However, if the judge grants the proposed possession order by your mortgage lender, then you’ll usually be given 28 days to vacate the property, but in some cases the judge could allow you up to 56 days. You will also have to pay court costs, which the lender typically adds to your outstanding debt.
You should leave the property within the allotted time provided by the judge if a possession order is granted. If you do not leave within the allotted time, bailiffs will be sent to remove you. The lender will apply to the court for a warrant to allow the bailiffs to repossess your home by force – if this happens, you’ll receive a written warning about when this is going to occur.
- The house is sold
Once your mortgage lenders have regained ownership of the property, they’ll sell it to recover the debt. However, until they sell the property, you still have to pay the interest on what you owe.
Once the sale is completed, the lender keeps the money that they are owed and pays you anything that is left over. If the property sale does not cover what you owe, you may have to pay off any mortgage shortfall to the lender.
How to avoid repossession
Firstly, if you fear your mortgage lender is going to begin the repossession process, it’s important to try and prevent this – or to prepare yourself if they do proceed.
If you’ve missed – or are going to miss – repayments, contact your lender as soon as possible. You should do this in writing as to have a paper trail that you can reference back to if you are taken to court.
Repossession is a costly process for lenders, and as previously mentioned, it’s a last resort for them. They also have to follow pre-action protocol rules – you can read more about those here.
Don’t ignore their calls and letters, in most cases, if you explain your situation, lenders will try a negotiate a way for you to catch up on your arrears. There are things you can ask from your lender, such as:
- Extending your mortgage term
- Change your mortgage type
- A payment holiday (a break from making payments)
- Reduced payments
- Capitalising the arrears (adding them to your total mortgage amount)
If you’re uncertain, speak to a legal or financial advisor – they’ll be able to help in figuring out the next step.
Another option to avoid a full repossession is a voluntary repossession – though this still involves handing over your property to your lender. This option avoids court fees and sometimes means you can stop making mortgage repayments, as when your house is repossessed, you are still liable to pay the interest on your debt until the lenders have sold the property to recover their costs.
How to stop repossession
It can be worrisome when a repossession order has been placed on your home – but it is possible to stop repossession, even right up to the day of eviction. It’s never too late to take action, as it’s not particularly profitable for your mortgage lender to resell your home.
- Talk to your lender
In line with pre-action protocol, your lender has to give you the opportunity to talk with them outside of court. They should allow you a fair amount of time to sell your house, or to arrange another way to pay – even if your lender is already applying to the court for repossession, you should still follow the options listed under “how to avoid repossession” above.
Ask your lender if you can change the type of mortgage you have, extend it or reduce your payments. If you can prove that this will then allow you to keep up with repayments, lenders will consider all reasonable options. There’s no harm in writing up a new mortgage proposal idea to your lender.
However, always ensure that communications between you and your lender are in writing at this point. If you do go to court, you will then have the opportunity to explain your situation to a judge and will have evidence of your attempts to resolve the situation.
- Pay towards your arrears
Even if you can’t pay the arrears in full – or make a full mortgage repayment – if you can manage any amount, no matter how small, you should pay this as soon as possible. Paying even the smallest sum back shows that these repayments are your top priority and you fully intend to catch up with your payments.
- Rent your home
Renting your home is a creative solution when faced with debt arrears. Consider taking on a lodger to live alongside, or if you can, stay elsewhere and rent out your whole home. This income could cover a significant part (if not all) of your mortgage repayments.
Of course, you should only do this with the proper legal agreements in place. If you decide to go down this route, you should speak with a financial advisor or even a letting agent to ensure you’re not breaking any laws on contracts, and you must keep the wellbeing of your tenants at the forefront.
- Check if you’re eligible for financial help
If a major life change has occurred which has led you to financial difficulty, you should check if you’re eligible to claim any kinds of benefits due to your situation.
For example, if you’ve had an accident or have developed a disability that has rendered you unable to work, you should be able to gain financial help from the government – which would help with your repayments.
Get in touch with your nearest job centre to find out more, and if you do end up claiming any kind of benefits, you should inform your mortgage lender of this straight away. Lenders shouldn’t start any possession action if your claim is likely to be approved.
- Check your insurance policy
Similar to the prior point, you should check with your lender if your plan included (or you specifically took out) mortgage protection insurance. These plans usually protect you in situations such as illness, suffering an accident or redundancy, and allow you to continue to make mortgage repayments if you no longer receive a stable income.
Providers will typically pay out around 125% of your mortgage costs, so it’s imperative that you check if this is something you’ve purchased.
- Consider a quick house sale
If you know that you can’t pay your mortgage or clear your arrears, you should try to sell your property before you consider voluntary repossession. However, although lenders are required to allow you a reasonable amount of time to sell your property, you might still be unable to sell it due to circumstances such as a bad market or the condition of the property.
While many people find they’re unable to sell their house traditionally before their house is repossessed, most people are unaware of how a quick house sale can stop repossession.
Selling your house through a regulated property buyer such as Good Move allows you to sell your house without paying any estate agent or solicitor fees. It’s a fast solution that stops repossession efficiently – with Good Move specifically, we aim to buy your property within three weeks for up to 85% of the market value in cash. The sale is confidential and doesn’t involve any hidden fees, meaning you can escape further financial duress.
However, you need to check with your lender that you can do this, as it may not be possible to sell your house if it has negative equity – meaning you owe more than it’s worth. The aim of selling your home is to pay what you owe, if you have negative equity this won’t be a good option for you.