Interactive Guide Index
- How does repossession work?
- How quick is the repossession process?
- What happens if my home is repossessed/ Why is it beneficial to sell myself before repossession?
- If my house is repossessed will I get an equity / If my house is repossessed will I get any money back?
- Do I lose my deposit if my house is repossessed
- Life after house repossession
Can you sell your house before repossession? Yes, you absolutely can, and the sooner the better.
UK Finance said that during the first quarter of 2021, there were a total of 77,640 homeowner mortgages in arrears of 2.5 per cent or more of the outstanding mortgage balance, while nearly 5,000 homes were repossessed by the mortgage lender in 2020.
So, if you are in arrears, you’re not alone, and the earlier you act, the better your chances are of keeping your home or at least selling on your own terms and being in a better financial situation than a repossession of your house will leave you in.
Stopping repossession is the ultimate aim, so before we dive into the details of how house repossession works, here are some tips to try and stop house repossession in the first place and avoid repossession of your property.
How to avoid and stop house repossession – tips to stop repossession.
- Seek independent advice. There are lots of housing charities which offer free, impartial advice that can help you to work out the next steps you’ll need to take and to make a decision that’s best for you. Charities like Shelter deal specifically with housing advice, but it’s also worth contacting your local Citizens Advice Bureau too.
- Contact your mortgage lender immediately if you’re going to fall into arrears. Although it’s scary, tackling the issue head on is the best way to deal with it. Mortgage lenders can be more helpful and understanding than you think, and it’s actually in their best interests for you to keep your home and continue paying the mortgage rather than repossessing it, so get in touch with them as soon as you fall into arrears or as soon as you know you won’t be able to make your next payment. If you’re suffering from temporary financial issues, you may be able to take a mortgage holiday or make your upcoming payment a few days late. Just get in touch with them as soon as possible, and discuss your situation with them. Remember, mortgage lenders have a legal obligation to help you, and it’s in their interests to stop repossession too.
If falling into arrears is inevitable and your financial situation isn’t likely to improve, then you’ll need to know how the repossession process works. However, it’s important to know that you’ll still have options to avoid repossession.
How does the house repossession process work? Can I choose voluntary repossession?
In very simple terms, the steps from arrears to repossession are as follows
- Firstly, you’ll go into arrears with your lender.
- If you continue to be in arrears, your lender will take court action.
- A court hearing will be scheduled where a judge will hear the reasons why your house should/shouldn’t be repossessed.
- If you don’t show for the hearing, it’s likely the judge will give an outright possession order straight away. But if you attend, the court will hear your case and take it away to deliberate a decision of your property.
- Court gives a decision – This could be a possession order, but it could be a suspended order, where an agreement is made to make up the mortgage arrears.
- Bailiffs can come to your house if you breach your suspended order.
- And, then repossession will happen, and the lender will sell your home.
You also have the option to choose voluntary repossession. This means handing your keys back to the lender and moving out of the property, so they can sell it to pay the outstanding mortgage balance. Once you’ve handed your keys over, you’ll still be responsible for mortgage interest, buildings insurance and maintenance costs until it’s sold.
If you’re thinking of going down the voluntary repossession route, it’s worth seeking professional advice first.
How quick is the repossession process? Can my mortgage lender force me to leave my property?
Repossession of your home is not a quick process; it can take up to 12 months.
Your lender doesn’t want to repossess your home. Their business relies on you paying the interest on your mortgage, if they sell the house they don’t make any more money.
It’s important to remember this because it is their last resort too and there are steps in between you can take to try and resolve the issue before it gets to repossession.
A lender would rather you pay something than nothing, so make sure you call them and try to arrange a payment plan as soon as you can.
Don’t ignore letters from your lender.
According to UK Finance, from March 2020 – 31 March 2021, lenders offered payment deferrals of up to 6 months to customers and buy-to-let landlords where Covid-19 had impacted their ability to meet their monthly mortgage payments.
If you are pre-empting that you might be able to go into arrears – which happens, you may have been made redundant, lost your job, had a change in financial situation – then letting your lender know beforehand can help. It shows your commitment to making your payments and that you’re trying to solve the issue before it arises.
What happens if my home is repossessed? Why is it beneficial to sell myself before repossession?
If your home is repossessed, your lenders will be looking to get their money back as soon as they can. They usually sell your house at an auction which means it’s sold for less than market value.
You will also pay your lender’s legal fees for taking you to court in the first place, arrears, penalties and any fees they’ve had to pay to sell your house.
By the time this has happened, a lot of people still end up owing their lender money, which is then even harder to pay back.
If you have the time and you’re able to, selling your house yourself gives you a little more control. You might still choose to sell it for less than its market value for a quicker sale, but at least you can control how much less.
If my house is repossessed, will I get any money back?
A lot of the time the answer is no.
By the time the lender has sold your house (a lot of the time for less than market value), and taken their legal fees, any fees for selling the house, arrears, and penalty payments back it’s more likely you’ll end up owing money.
Do I lose my deposit if my house is repossessed?
That very much depends on how much your deposit was. You could get some of it back, but it’s highly unlikely you’d get it all back.
Let’s say you bought a house for £300,000 and you put a £200,000 deposit down. Your mortgage is for £100,000.
You’ve paid £25,000 and then fall into arrears, leaving you with £75,000 left to pay.
The lender will sell your home for less than market value, so let’s go with £270,000.
Once they take their £75,000 back, the penalties for arrears, the arrears payments, the legal fees, and any fees they’ve paid to sell the house back, you’d be left with less than the £200,000 deposit you paid.
So, no, you will never get your full deposit back, but depending on how large the deposit was, you might get some of it back.
Life after repossession
Repossession affects your credit score. It can make it hard for you to borrow again and if you can borrow again, you’ll have higher interest rates. Lenders will now see you as a higher risk to lend to, which can be especially hard if you still have debt once the lender has sold your house.
It takes 7 years, from the first missed payment of your mortgage, for a repossession to come off your credit file.
Should I sell my house before repossession? Can I make a quick house sale?
You should seek legal advice before making any decision, but it’s more beneficial if you can sell your house before it’s repossessed.
A quick house sale is entirely possible, which will allow you to avoid further repayments and sell house fast, and avoid the house repossession process.
About Richard Mews
Richard has 31+ years of property experience, has been Chairman of several regeneration committees and has helped more than 600 homeowners and landlords get easy, stress-free personal solutions for selling their property. Richard’s goal is to give you unbiased help to receive a quick house sale, even if that means not working with him.
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