Owners of mortgaged property are expected to keep up with regular repayments in order to grow an equity stake in their home and to gradually reduce the size of the loan they have received.
Those payments must be made in full and on time, according to the stipulations of the mortgage agreement.
While these amounts may be fairly manageable in the early stages of home ownership, financial circumstances can change abruptly. If this happens, it can be easy to find oneself in arrears.
From this point, it is a slippery slope towards house repossession. This troubling concept is a stark reality for many individuals.
It is worth noting, however, that there have been comparatively few repossessions in recent years compared with the previous decade.
A government report published in the final quarter of 2021 revealed that around 8,000 properties were repossessed in 2019 - significantly below the 48,900 figure from 2009.
The recent “mortgage holidays” and repossession freeze put in place to protect home owners during the COVID-19 pandemic will also have had a major effect on these numbers since the publication of this document.
However, despite this decline, the threat of repossession remains for individuals and families across the UK.
If you are worried about being able to afford your mortgage repayments or get out of arrears, or if you are facing repossession in the near future, read on.
This guide will provide you with the resources and information you’ll need to improve your situation, including advice on ways to stop repossession or to sell your property on your own terms in order to escape debt.
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Mortgage arrears are mortgage debts. If you are in arrears with your lender, it means that you owe them money and that your pre-arranged repayments are overdue.
Many lenders will charge a borrower certain amounts for being in arrears. This enables them to avoid losing money. However, it can make it harder for the homeowner to regain their financial footing, which means that arrears are a very slippery slope that can easily end in repossession.
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In basic terms, house repossession is a process whereby the lender of a property loan or mortgage may claim ownership of a home in response to unpaid sums.
Usually, it also results in the eviction of the property’s owners or residents.
Repossession is supported by UK law and often comes as a result of failure to keep up with mortgage or property loan repayments. Throughout this guide, we will explore the process or repossession and the actions you can take to avoid or reverse it.
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So, exactly how does house repossession work? The process moves forward in steps, as the law states that all parties involved should receive sufficient notice of each official action.
While it may seem fairly drawn-out, the periods of time between each stage may provide homeowners with the opportunity to take action, potentially stopping repossession of their house as a result.
Below, we have explained each step in some detail to make the whole system as clear as possible.
Here, you’ll learn about the process that must take place in order for a home to be repossessed, as well as the notice that must be given prior to each step.
The time at which the repossession process may begin depends on the specific contractual terms originally agreed upon by the mortgage lender and the borrower when the mortgage was first arranged.
Most commonly, lenders will begin repossession proceedings once the homeowner’s repayments have been in arrears for anywhere between 90 and 180 days.
The lender is legally required to give the borrower 15 days’ notice before they begin to take court action.
Most mortgage lenders will be fairly prompt when it comes to notifying a homeowner about a missed payment. The lender will usually send a letter as soon as the first mortgage payment is missed, detailing what is owed.
This means that borrowers who are in arrears with their provider will almost always be aware of the fact - and of the precise scale of the issue.
If, as a homeowner, you have not taken steps to remedy the issue within a certain specified timeframe - i.e. once the pre-agreed 90-180 day period has lapsed - you will receive notice of a court hearing that will mark the beginning of the repossession process.
If you are currently struggling with mortgage repayments, your mortgage lender should always keep you abreast of the situation. If you are concerned that they are not providing you with the information you need, it’s important that you get in touch with them as soon as possible.
Keeping your mortgage lender up to date about any repayment issues can be one of the best approaches to take when fighting repossession.
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After sending the homeowner notice of the start of the repossession process, the mortgage lender will then apply for a court order.
They may either attempt to claim payment to the value of the homeowner’s arrears while repossessing the property, or they could choose to request an accelerated repossession order without arrears.
Both of these options will come at a cost to the lender, but that amount will be repaid by the borrower after repossession is complete.
The owner of the property at the centre of the repossession order will receive a letter from the court summoning them to a hearing at a set date and time.
At this court hearing, the owner will be able to explain their situation and provide evidence of the steps they have taken to:
Keep their lender up to date regarding the situation Arrange ways to make up the required repaymentsThe information offered to the court is likely to make a significant difference to any fight against repossession. This is why it is so important for the mortgage borrower to stay in close contact with their lender and try to make a plan with them as they work to get themselves out of arrears.
The judge may rule in the lender’s favour and grant a repossession order.
However, if the homeowner argues their case well enough and provides sufficient evidence of attempts to collaborate with their mortgage provider, the repossession order will be put on hold for the moment.
In this scenario, in order to keep their home, the mortgage borrower must stick to the terms of a repayment agreement drawn up between themselves, the mortgage provider and the court.
Failure to act in accordance with this agreement will result in eviction.
Typical outcomes of a repossession hearing may include:
Usually, any possession order will come with an additional “money judgement”. This means that the borrower is ordered by the court to pay a sum that has been calculated according to their mortgage arrears, their own court fees and the mortgage provider’s legal expenses.
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If the judge rules in favour of the mortgage lender, the homeowner must leave their property in the allotted time or face being removed by bailiffs as the result of a further court order.
Should a “Bailiff Order” be granted, the homeowner will be informed by letter of the time and date on which this is to occur.
If the judge rules in the homeowner’s favour, they will be permitted to remain in the property and retain ownership as long as they continue to abide by the terms of the court-ordered repayment agreement.
Once you have left your property following a repossession order, it is likely that your mortgage lender will attempt to sell it as soon as they can.
They will do this in order to recoup any losses they have experienced as a result of missed mortgage repayments.
The longer they wait to sell the property, the more interest the ex-homeowner will be charged on the amount they owe. This means that, in many cases, a fast sale is a somewhat favourable result for both parties.
If the amount for which the property eventually sells falls short of the amount owed by the borrower, they will also be charged the difference.
So, can you get your house back after repossession?
It is unlikely that you will be able to reclaim the property once it has been repossessed, partly due to the speed at which the lender may try to secure a sale, and partly because they may be hesitant to have future dealings with an ex-client who has previously fallen behind on payments.
However, it remains a slight possibility - particularly if you are able to access a lump sum large enough to cover all arrears and outstanding payments in one go.
At this point, it remains up to the lender to decide whether they wish to negotiate further with the evicted owner, or whether they want to push ahead and sell the property on.
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Can you stop a house repossession? Absolutely. However, you will need to act as early as possible. In this section, we’ll explain the steps you can take to fight a repossession order effectively and get yourself out of arrears.
In order to prove to a court that you have had sufficient communication with your lender, and that you have attempted to work with them on a plan to repay what you owe, it is vital that you keep in touch with your mortgage provider regarding all arrears and payment delays.
As soon as you realise that an amount is likely to be missed or made late, you will need to explain this to the bank, building society or other body to whom you make mortgage payments.
Ideally, you should start to discuss potential payment plans or other adjustments to your mortgage terms as quickly and as extensively as possible once any issue arises - in order to gradually reduce the financial pressure and find your way out of debt.
The success of these communications will depend on how proactive and willing you are to come to an agreement, as well as the lender’s inclination - or lack thereof - to negotiate with you and to provide you with support.
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In some cases, your home insurance or other cover connected with your mortgage may protect you against penalties for late or missed repayments. It may even go a long way towards preventing potential eviction.
Usually, these insurance plans will only pay out in specific circumstances; for example, you may be protected if you find yourself unable to keep up with mortgage repayments due to illness, injury or redundancy.
Be sure to check your policy closely for any clauses of this kind before taking further steps.
If you need extra income in order to meet your mortgage repayments, you might decide to rent out part or all of your property on a short or long term basis. This is a great way to generate income from your home and see it paying for itself.
Ideally, the rental payments you receive will be enough to help you gradually reduce your arrears - but you will need to explain to your lender that you intend to take these steps, as taking on a tenant or lodger may go against the terms of your mortgage agreement.
It’s important to understand that you will need to have sufficient funds to properly maintain your property and ensure the well-being of your tenant.
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Your mortgage conditions are not set in stone. Your lender is likely to want to resolve any issues as much as you do - as it will save them the short term expense and complexities of taking you to court.
To this end, mortgage providers are often able to call upon certain approaches and techniques that will help their clients to free themselves from arrears and get a handle on their repayments.
Depending on your mortgage lender and the terms of your agreement with them, you may be able to:
Here, we’ll explain a little more about each of these options.
Many lenders will allow you to extend the term of your mortgage. This means that the final payment date will be further in the future, so each monthly amount will be less.
However, you will be required to pay more interest over this lengthened period, which means that the final amount will be greater than it would have been under your original terms.
Furthermore, the end of your mortgage term should not come after your date of retirement.
This is because most mortgage providers are very reluctant to lend to buyers who will be entirely reliant on their pension in order to make repayments - as they tend to be more likely to fall behind.
Typical mortgage terms tend to be 25, 30 or 35 years, but your lender may be willing to consider other timescales.
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If your current mortgage is not working for you, there may be an option to change it while remaining with the same provider.
For example, you may be able to move from a variable rate to a fixed rate product fairly easily. If you have a variable rate mortgage, your payments may vary month on month, as the interest you pay will depend on the wider economy and other considerations.
A fixed rate mortgage will see you paying the same amount every time, no matter what external factors may be at play.
Switching from a fixed rate mortgage to a variable product, on the other hand, is much rarer - and some providers do not offer this as an option.
Alternatively, you may be able to move from a regular mortgage to an interest-only option. However, you should tread carefully if you decide to take this route.
This product is precisely what it says on the tin - meaning you won’t be paying the off loan itself, merely the interest on that loan. As a result, you will still be liable for the full amount when your mortgage term draws to a close.
You will also be paying more interest than you would with a standard mortgage. Switching to a product of this kind may work well in the short term, but it is certainly not a long term solution.
If you are not currently in arrears, but you are concerned that you will struggle to make repayments under your current mortgage contract, you may instead decide to remortgage in order to find a better plan.
Some lenders will permit their clients to add their arrears to the amount they already owe.
This provides them with something of a “blank slate” in the short term, but, of course, it means that the final amount will be greater and that they will be paying more interest due to the loan’s increased value.
This may be a good option if you wish to get out of arrears, and, by suggesting this approach to your lender in writing, you will be able to use that communication as evidence of your willingness to cooperate and develop a plan should you need to attend court.
Under some circumstances, a mortgage lender may permit a brief “payment holiday”. This term refers to a pause or temporary reduction in your mortgage repayments.
You can usually only make an arrangement of this kind if you are in credit with your provider. This means that you will need to have made an overpayment in the past.
Different providers specify different conditions when allowing a mortgage holiday. The most common qualifying circumstances include going on maternity or long term sick leave, or being made redundant.
It is important to check the particular conditions of your specific mortgage product to make sure that you are able to arrange a payment holiday. Again, upon asking your lender for this, you should keep a copy of all communications - as this may help you to fight repossession in court.
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Your mortgage debt cannot be written off if you declare bankruptcy. However, in some cases, you may be able to arrange an Individual Voluntary Arrangement (IVA).
In this way, you may be able to arrange with your creditors to pay back all amounts owed over a set period of time. However, your mortgage lender will need to agree to this arrangement, which is rare.
If you know that you will be unable to fight a repossession order, the next step will be to try and sell the property on your own terms. In this way, you will be able to receive some funds from the final sale price.
One option is an “Assisted Sale”. This approach involves arranging to sell your home directly to a company or investor at the end of a pre-agreed period.
This third party will take ownership of the property and sell it on, paying the original seller a pre-agreed price.
Many types of Assisted Sale see the investor or “buyer” taking on all expenses and responsibilities associated with the property - including bills, maintenance costs and mortgage payments.
There are a range of different types of Assisted Sale available, including:
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In this arrangement, an investor (the “buyer” of the property) will pay a certain amount of cash to the seller up front. This usually amounts to a percentage of the seller’s equity stake in the home. The remainder will be paid at the end of the pre-agreed period.
Between the date of the agreement and the date of the sale, the investor will work to add value to the property in order to make a profit. As mentioned above, they will also usually pay most of the expenses associated with the home.
As the name suggests, this type of Assisted Sale is much the same as the “with cash advance” option.
The only difference is that there is no payout in advance, making this arrangement more suitable for individuals who have already moved out of their property and who need the sale to move fast.
A lease option is usually a slightly lengthier arrangement, where the buyer pays the seller a certain amount to purchase the “option” on the property.
They often make regular payments to the seller - often monthly, in a similar manner to a tenant paying rent - until a pre-arranged date upon which they are able to take ownership of the home for a pre-set “strike price”.
The buyer may even rent the property out to an additional tenant to achieve additional profits.
There is the possibility that the investor will decide not to take the property on at the end of the set term - after all, they have only purchased the “option”. However, a homeowner in financial difficulty will very likely see the benefit of receiving monthly payments on their property.
However, it is still possible for the agreement to restart with adjusted terms.
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It may be possible to make a request for an “Assisted Voluntary Sale” (AVS). This can be arranged via your mortgage lender - though it is not something that is offered by every provider.
This approach enables you to enter into an arrangement with your lender, whereby you agree that you will arrange the sale of your property on or by a certain date.
Your lender may even assist you in the sale in particular ways, or they may relieve financial pressure by reducing your required payments for the agreed period.
This option works well for homeowners who need to sell their property to get out of mortgage arrears or avoid repossession, helping them to receive some funds back from the sale and allowing them a reasonable period of time to get their affairs in order before they must move out.
Voluntary repossession simply amounts to handing your keys back to your mortgage lender and informing them that you cannot afford to keep up with your repayments.
This is not recommended, as - while you may avoid costly legal fees when fighting your provider’s repossession order - you will have to leave your property fairly promptly.
You will also be held accountable for any interest payable on the mortgage, as well as paying related buildings insurance premiums and the cost of any maintenance.
It is definitely worth avoiding repossession of any kind if you possibly can. After all, there are significant costs involved - along with a potentially lengthy legal process and significant stress.
What’s more, repossession will have a severe impact on your credit score, making it much harder for you to get a mortgage. From the very first missed payment, your credit rating will be affected for the next seven years - so this is no minor issue.
You can also get in touch with your local council for help if you think your property will soon be repossessed. You should also consider contacting your local Citizens Advice Bureau or seeking out other financial advice.
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One option that is swiftly growing in popularity is the use of a quick home buying company. Organisations of this kind are often also known as “fast house sale” companies or “cash homebuyers”.
These are companies that buy your property from you directly, as part of a cash sale. Usually, the homeowner will need to approach the home buying company to request an upfront cash offer - which is calculated via a desktop valuation.
If the offer is acceptable, the company can purchase the property quickly, as they do not need to wait for buyers to express interest, or for chains to complete.
To this end, many fast sale companies are able to buy property in under 30 days - and some can achieve this in as few as one to three weeks.
Most commonly, the seller will receive between 70 and 85% of their home’s market value. This is to enable the company to make money. However, many organisations of this kind waive their agency fees and cover the seller’s legal costs.
While the industry is not formally regulated, many organisations in this sector voluntarily sign up to the:
If you wish to ensure that your chosen service provider is trustworthy, simply check for this information on their website. Alternatively, you can contact them directly to discuss this, or explore the websites of the relevant bodies.
This option can be hugely beneficial to homeowners who are in mortgage arrears or facing repossession, as it means that they may be able to access the funds they need to get out of debt fairly quickly and sell their house without having to wait too long.
After all, the longer it takes to sell a property, the more likely it is that the homeowner will fall further into debt.
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Property repossession can be a very concerning prospect - and while it is perhaps not as common as it used to be, it is a very real threat to many homeowners.
We hope that this article helps you to understand your options when struggling with mortgage arrears or the prospect of repossession.
If you would like to find out more about the fast home buying options available to you, simply contact our knowledgeable and friendly tame today. They can offer you a free home valuation and a no obligation cash offer for your property.
If you are happy to accept the offer, we can sell your home in as few as 7 - 21 days, relieving the pressure and helping you to move on with your life.