Knowing how to stop a home repossession can help prevent an outright catastrophe. Unfortunately, evidence suggests that the vast majority of homeowners have no real understanding of how to stop a repossession from occurring.
Contrary to popular belief, most banks and lenders will do everything within their power to stop a repossession becoming necessary. Though it is typically the efforts (or otherwise) on the part of the debtor that will determine the outcome.
The better you understand the way a repossession works, the better your likelihood of being able to avoid a repossession if the worst should happen.
What is Repossession?
Repossessions occurs when a mortgage lender seeks authorisation from the courts to take possession of your property, in the event of non-payment on your mortgage or failure to keep to the terms of the mortgage. When entering into a mortgage contract, you grant the lender a certain stake (or level of ownership) in your property. Their ownership level decreases as you repay the loan, though the lender maintains the right to seek a repossession order at any time in the event of non-payment.
This means that even if you have repaid 85% or even 95% of your mortgage, your home could still technically be repossessed if you do not keep up with your payments. The basics of how to stop a repossession in the UK are relatively simple, but it is essential to take affirmative action at the earliest possible stage.
How Does a Repossession Work?
Banks and lenders rarely seek repossession orders without first considering all other viable options to resolve the issue. Where a bank chooses to pursue the repossession of a property, the process generally takes place as follows:
1. Mortgage Arrears
Missing the occasional mortgage payment is not typically grounds for repossession. You may face late payment fees or other penalties but your lender will usually give you fair warning, along with the opportunity to make up your repayments.
It is only when mortgage arrears become relatively serious that repossession proceedings begin. With regard to how to stop a repossession order being sought, it is vital to speak with your lender at this early stage to reach a mutually amicable agreement.
2. Court Order Application
This is where the lender makes a formal application to the courts to repossess your home, which involves a court hearing you must attend. The judge presiding over the case will hear evidence and listen to arguments on both sides of the dispute, ultimately determining whether or not to grant a repossession order.=
3. Repossession Order and Eviction
If the lender’s application for a repossession order is successful, the occupant of the property will usually have a period of 28 days to move out. This may be extended to 56 days in some cases upon request or appeal.
It is important to note that all court costs incurred on both sides will be added to the borrower’s outstanding debt, often significantly increasing the balance owed. Eviction occurs where the occupant of the property refuses or is unable to leave their home by the agreed deadline, at which point they may be physically removed along with their belongings.
How to Avoid Repossession
Understanding how to stop the repossession of your home through constructive dialogue is essential for all homeowners. Nobody plans to fall into arrears or deliberately fails to meet their repayment obligations – hard times and financial shortfalls often cannot be predicted.
There are various options available for stopping a repossession becoming necessary, which for most struggling homeowners include the following:
1. Reach out to your lender
Major banks and lenders are often willing to stop repossession in its tracks, simply by discussing the issue with the borrower and coming up with a viable repayment plan. This could include a temporary suspension of your repayments until you get your finances back on track, a lower monthly repayment you can afford or anything else that allows you to gradually repay your debt. Acting early is essential as leaving things until the last moment makes it more difficult to reach an acceptable agreement.
2. Pay off some of your debt
You may be unable to pay off your arrears in full but simply offering to pay off at least some of your debt demonstrates to your lender that you are committed to meeting your obligations. Again, this should be discussed at the earliest possible stage to prevent repossession becoming necessary.
3. Consider a bridging loan
If your financial shortfall is strictly temporary, you could consider securing a short-term loan against your home. One example of which being a bridging loan, which can be issued in a matter of days and repaid in full within the subsequent few months. This opens up the possibility of repaying your outstanding mortgage balance in full, selling your home for its full market price and repaying your bridging loan in one lump sum. All remaining profits would be yours to keep, which could be used to finance a new home purchase when the time is right.
4. See if you’re covered by mortgage protection insurance
It’s always worth checking whether you are covered (fully or partially) by a mortgage protection insurance policy. Many homeowners enter into such policies when taking out a mortgage, though do not fully understand the extent to which they are covered.
Depending on the circumstances surrounding your financial shortfall, your mortgage insurance policy could cover your repayments to avoid home repossession entirely. For more information on short-term borrowing for covering urgent expenses and outgoings like these, book your obligation-free consultation with the team at UK Bridging Loans today.