A property repossession will only ever occur as a last resort after multiple missed mortgage repayments. If you are concerned about meeting your mortgage repayments, there are many steps you can take before your property is repossessed.
What Is a Property Repossession?
A property repossession occurs if you are unable to pay your mortgage repayments. When you take out a mortgage to buy a property, you are using the property as collateral for the loan. This means that the lender has a financial stake in the property. The more of your mortgage you pay off, the less this financial stake will be. However, if you miss mortgage repayments, your lender could be entitled to repossess the house, sell the property and use the sale proceeds to compensate the money they lent which you could not pay back.
There are many different steps that happen before a property repossession and your lender is legally required to allow ample warning. Not only that, but you will have to have missed multiple payments rather than just one – usually three or more. Before taking drastic action of repossession, your lender will most likely to try arrange an alternative repayment plan, organise court action, or send bailiffs. Only then would a property repossession be possible.
If you have missed multiple mortgage repayments and fear that you are at risk of property repossession, you should contact your lender immediately to explain your specific circumstances and try to come to a reasonable agreement of how you could repay your debt before they repossess your property.
How Can I Avoid House Repossession?
If you are worried about meeting your monthly mortgage repayments, there are many steps you can take before you are at risk of property repossession:
1. Speak to Your Lender
Try to contact your lender as soon as possible if you fear that you cannot meet your monthly repayment. In some cases, you could reason with them and explain your personal circumstances. It could be that they are willing to renegotiate the terms of your mortgage and draw up a new mortgage repayment plan.
2. Put Money Towards Paying Off Your Debt
Even if you are unable to pay off your arrears in full, you should still be seen as putting money towards it – whatever you are able to afford. This shows lenders that even though you cannot afford the full payment, you are making an effort to pay the money back and are prioritising your mortgage payments.
3. Explore Potential Financial Benefits
If you are unable to pay your mortgage back due to a change in your financial circumstances, research whether or not you might be eligible for certain government benefits or insurance payments.
4. Rent Your Property Out
Think about renting out your property or a room of your property and using the rent money to put towards the money you owe on your mortgage.
5. Make a Quick House Sale
If you cannot repay your mortgage, think about selling your property fast to pay back your mortgage.
What Steps Occur Before a Property Repossession?
Before a lender is able to repossess your property, there are many things that need to occur:
Missed Payments
If you miss one mortgage payment, it does not automatically lead to repossession; property repossession can only occur if you have continually missed payments. Before lenders can entertain the possibility of repossession, they will try to contact you about your missed payments. This is your chance to appeal to your lender and share your financial circumstances. At this stage, think about a reasonable negotiation and try to offer a realistic repayment plan that you will be able to stick to. If your lender does not agree to the proposed negotiation, they will issue a second warning and could start to consider court action.
Court Order
Court orders will occur only if you are unable to renegotiate a mortgage repayment plan. As part of the court order, lenders will detail why the judge should grant them legal possession of the property and they will likely outline your missed payments and any prior attempts at contact. Court orders will cost the lender money so it is unlikely that they will do this unless they feel that it is completely necessary.
The Court Hearing
If the court order approves, you will receive a date for your court hearing. Attending your hearing is crucial as it is your only opportunity to explain to both the lender and the judge why you have missed your repayments and what you intend to do about it. At this stage, you can propose a new repayment plan. During the court hearing, borrowers and lenders can present evidence. It is important that during the entire process you put everything in writing as you can then use that in court as a way to demonstrate that you have tried to resolve the problems with your lender.
Possession Order
If the judge does rule that the mortgage lender has legal entitlement to the property, you will be given a 28 days to vacate the property. You will be required to pay any outstanding debts in addition to the court costs. However, if the judge rules in your favour, you and the lender will need to sign a new repayment agreement.
Eviction
Eviction will only occur if you do not vacate the property within the allocated time or if you fail to stick to the new repayment agreement. Lenders can apply to the court to facilitate the repossession of your home and send bailiffs to forcibly remove you. You will always be warned about this before bailiffs arrive at your home.
House Sale
If the lender regains possession of the property, they will sell it in order to recover their debt.
