Repossession Explained

The risk of repossession arises for homeowners who cannot make their scheduled mortgage payments. There may be any number of reasons for this, from being made redundant to mismanaging their monthly budget. It’s not something that happens instantly, there are a number of steps between missing payments on your mortgage and your home being repossessed by a lender.

According to the housing charity Shelter, between September 2011 and September 2012, 198,470 households in England were threatened with repossession or eviction, with the top ‘hotspots’ for eviction all located in London. As redundancy numbers rise, small businesses continue to suffer, benefits are cut and household budgets squeezed, repossession numbers are expected to rise.

For those who are facing the daunting prospect of repossession, the first, difficult step is to try and come to terms with the reality of the situation as quickly as possible, as time really is money. The shock of a sudden redundancy that leads to a huge drop in income, being without a job for the first time in your life, or simply not being able to get a job can be humiliating and something that many would rather face another day . However, facing up to the reality of repossession will mean that you may be able to take control of the situation and secure a better outcome for yourself and your family.

The first step when facing repossession is to look at your monthly incomings and outgoings to see if there are any adjustments that can be made to catch up on those missing payments. Although it may seem like a big step, selling your property may be preferable to having it repossessed and may mean you end up with a better financial deal. It is also worth trying to negotiate a solution with your lender – the best outcome for everyone is that the mortgage is paid off as agreed and if there is a chance that payments can return to normal in the near future, most lenders will at least be open to negotiation.

If legal action is taken against you and you are faced with repossession then it can take some time for proceedings to get going – up to six months in most cases, which still gives you time to try and find another solution. Once proceedings have been started there are certain steps a lender must take, including providing a statement of how much is outstanding, and interest that has been added to the mortgage, as well as responding to any proposals you may make to try and resolve the situation.

If the repossession gets to a hearing then a court may grant the lender a repossession order – this is not the same as an eviction. Some of these orders are never executed and it can be up to three months before a homeowner is forced to leave. Once an order has been granted then the former homeowner will remain responsible for the mortgage payments until the property is sold. When the property is sold – if the sale amount is enough to pay off the mortgage owed to the lender, as well as interest – then there is no longer a debt. However, there are risks with respect to a resulting bad credit rating and it may not be possible to obtain another mortgage in the near future – or at least one with favourable terms.

Being threatened with repossession is a frightening time but if this is happening to you at the moment then you are not alone. It’s important to remember that these are tough times for everyone and repossession can be avoided by pro-activity on your behalf.

If you are facing problems, and would like to speak to one of our advisors in confidence, please call Jemima Poppy today on 01908 232879.