How to avoid home repossession
Having your home repossessed is a fairly disastrous life vent, for those unfortunate enough to experience it. As well as the devastating effects of losing your home, your credit rating will be severely damaged for years to come, making renting a house, getting a car loan, credit card or any form of credit near impossible and extremely expensive if you do manage to. Even at the very last minute you can avoid being repossessed by selling to a cash buying company, as long as the sale price is enough to satisfy the mortgage and any other charges secured against the property.
Getting into mortgage arrears
There are many reasons why someone could get into mortgage arrears. From decundancy, unexpected expenses, illness or just financial mismanagement, the reasons are as varied as the individuals involved.
If you miss the payment date of your mortgage, your lender will normally contact you more or less immediately and certainly within a day or two of the missed payment. Often it's the fault of an error, accidentally cancelling your direct debit or not realising another bill had come out and left the account you normally pay your mortgage from short. If this is the case, the payment can be quickly made and there will be no impact on you or your credit score.
If the missed payment remains in arrears for more than a month behind, your lender will inform the major credit bureaus and your credit score will begin to be downgraded. If the arrears stay unpaid for more than 90 days, you're deemed to have defaulted on your loan and the lender will begin proceedings to repossess the property.
The most important thing is to talk to your lender as soon as you become aware you're not going to be able to pay, even better if that's in advance. Lenders have both a legal obligation, as well as self-interest to work with you to make a plan to clear the arrears over time. A repossession is the very last resort for a lender and they have to show they've done everything possible to avoid that outcome.
Going to court
If you can't reach an agreement with your lender then they will begin court proceedings to recover the property from you. Before this came happen the lender must;
- tell you how much you owe
- consider a request from you to change the way you pay your mortgage
- respond to any offer of payment you make
- give you reasons for turning down your offer of payment 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
- tell you the date and time of a repossession hearing
- let your council know within 5 days of getting notification of the date of the court hearing, in case you need to apply to the council as homeless
Even when your lender has started court proceedings against you, you may still be able to reach an agreement with them. If you do, you'll still need to attend court to advise the judge about the agreement unless you're notified in advance you don't need to attend.
The lender can only repossess your home if the court grants permission.
The judge could decide to:
- adjourn (delay) the hearing
- set aside the case, which means no order will be made and the hearing is finished
- make a repossession order
Outright possession order
This gives the lender a legal right to own your home on the date given in the order and is sometimes called an ‘order for possession'. This is usually 28 days after your court hearing.
If you do not leave your home by the date given in the order, your lender can ask the court to evict you.
Suspended possession order
This means that if you make regular payments as set out in the order, you can stay in your home.
If you do not make the payments, your lender can ask the court to evict you.
This means that you have to pay the lender the amount set out in the order.
If you do not make these payments:
- money could be deducted from your wages or bank account
- bailiffs may take away things you own
Your lender cannot use a money order to evict you from your home. If you do not make payments set out in a money order on time, your lender could go to court again. As a result, the judge could decide to give them a possession order.
Possession order with money judgment
A money judgment is usually added to a possession order. It means you owe a specific amount of money usually made up of:
- your mortgage arrears
- court fees
- your lender's legal costs
A money judgment will not apply if:
- you pay your mortgage arrears and any amount set out in a suspended order
- your lender sells your home and the sale price is more than the amount set out in the money judgment
If you do not pay the amount set out in the money judgment, the lender may ask the court to carry out the instructions in the possession order and the judgment.
This means that the judge changes the amount you pay on your mortgage for a set time by:
- changing the regular amount you pay
- changing the interest rate on your mortgage
- delaying the next time you have to make a payment
If you do not make the payments, your lender can ask the court to evict you. A time order is usually only made on some types of loan like a second mortgage.
Disposing of your home to stop repossession
If you're about to be taken to court, disposing of your property by selling to a cash buying company can be an effective way of being evicted from your home. A cash buyer will pay around 80% of market value and you'll have the funds in as fast as 7 days. They can also sometimes offer assisted sales, whereby they will agree with your lender to take over your mortgage payments until they manage to sell your house. Although you won't get full market value, it's worth considering as nobody wants a repossession on their record.