How to stop repossession of your house
If you’re struggling to keep up with your mortgage repayments and are faced with the prospect of losing your home, it’s likely to be a very worrying time. Nobody wants to have their home repossessed, but it may still be possible to stop it if you act quickly. This simple guide explains how to stop repossession, no matter what stage of the process you’re at.
In this guide
- What is house repossession?
- What is the house repossession process?
- How to avoid house repossession
- Can you stop house repossession after court decision?
- What happens if my house is repossessed?
- What happens to your house after you’ve been evicted?
- What happens to your mortgage after your home is repossessed?
- Other reasons for house repossession
- How many houses are repossessed in the UK?
What is house repossession?
When you fail to keep up with your mortgage repayments, your mortgage lender can take ownership of your property. This is known as repossession.
House repossession may occur if you continually fail to make your mortgage repayments, or fail to pay back any loan(s) secured on your property.
What is the house repossession process?
If you’re struggling to keep up with your mortgage repayments, it is important to contact your mortgage lender as soon as possible. You may be able to arrange a new repayment plan, or they may be able to move you onto a cheaper mortgage product if one is available. If you do not get in contact with your mortgage provider, you will receive a letter from them asking you to arrange repayment of the outstanding debt. Contacting them before you receive this letter will demonstrate that you’re being financially responsible and proactively seeking a solution to the outstanding debt.
Before your mortgage lender can begin the legal route to repossession, there are certain steps they must follow. These include:
- Informing you of how much you owe
- Considering any requests from you to change the way you pay your mortgage
- Responding to any payment offer you make, no matter how small
- Explaining any decision to decline an offer from you within ten days
- Giving you at least 15 days warning, in writing, if they plan to take you to court
Going to court for house repossession
If you’re unable to repay the outstanding debt and keep up with your ongoing repayments, your lender will begin the legal process of repossessing your property.
You will receive a letter informing you that a court date has been set for your property repossession hearing.
The letter will contain the following information:
- The date and time of the court hearing
- Reasons why the lender is applying to repossess your home
- A defence form for you to complete and return in time for the hearing
It is important that you complete the defence form as it is your opportunity to explain your situation to the judge. If you are unsure of your defence, you may want to appoint an advisor to help you prepare for the hearing. An advisor will help gather evidence for the court case and negotiate with the mortgage lender on your behalf.
Possible outcomes from repossession court case
There are several possible outcomes from your repossession court case:
- The judge will decide your home should be repossessed.
This will lead to you being evicted from your home.
- The judge will make a suspended possession order.
This will allow you to stay in your home while a repayment plan is put in action to clear the debt. There will be strict conditions with this order that must be met. If you fail to meet the conditions of the order, your home will be repossessed.
- The judge will adjourn the case.
If the judge isn’t satisfied with the evidence on the day, they may postpone the court hearing to a later date. The extra time will allow both you and the lender to take certain steps before returning to court.
How to avoid house repossession
The best way to avoid house repossession is to communicate with your mortgage lender. You should contact them as soon as you find yourself facing financial difficulty and struggling to keep up with your mortgage repayments – don’t wait until you are facing arrears that you can’t afford to repay. The earlier you can start working with your mortgage lender to address the problem, the better. Your mortgage lender will only look to repossess your property as a last resort so it’s important to make every effort in stopping repossession of your home.
Can you stop house repossession after a court decision?
It may still be possible to stop repossession, even after a court judgement has been made. It is never too late to negotiate with your lender and agree a strategy to clear the outstanding debt and continue to meet your mortgage repayment obligations. If you feel you are unable to clear the debt, or do not feel confident that you will be able to meet the ongoing repayment obligations due to a change in circumstances, it may be possible to ask for more time so you can sell your property yourself to clear the debt.
There are several benefits to securing a sale yourself if you’re facing eviction. A study by the Joseph Rowntree Foundation found that home repossession has a number of long-lasting negative consequences. Those who have been through a property repossession will have difficulty securing future lending and also report experiencing a number of emotional and mental health challenges. Being able to take control of the situation and sell the property yourself will eliminate most, if not all, of the negative impact.
To stop repossession, you will need to offer your lender proof that a sale is in progress. If you’re struggling to find a buyer on the open market, or you need a quick and guaranteed sale to satisfy your mortgage lender, you may wish to consider selling your property to a professional home buying company.
What happens if my house is repossessed?
If the judge concludes that you are unable to pay the arrears, you will need to leave the property.
You will usually have 10-14 days to vacate the repossessed property. If you fail to leave during this period, the lender will apply for permission to evict you. Permission to evict can take a further few weeks.
What happens to your house after you’ve been evicted?
Once you have vacated the property, your mortgage lender will make plans to sell it. Your house will usually be put on the market as soon as it is vacant. The mortgage lender has a responsibility to get the highest possible price for your property and will seek independent expert advice, however many will choose to sell repossessed properties at auction.
What happens to your mortgage after your home is repossessed?
The proceeds from the house sale will be used to clear your outstanding debt. If there is any surplus after the mortgage and any relevant fees have been repaid, you will be given the remaining profit. If the proceeds from the sale are not enough to cover the amount you owe, you will be responsible for the outstanding ‘shortfall debt’. You will need to make arrangements with the mortgage lender to repay the outstanding debt. This debt will usually continue to accrue interest.
Other reasons for house repossession
Although missed mortgage payments are the leading cause of home repossession, there are a number of other circumstances that can prompt lenders to take action.
If you fall into financial difficulty and accrue a number of debts, you may not be able to pay everything you owe. Declaring bankruptcy may be the only way forward. If you are declared bankrupt, you can use your assets to pay back your creditors over a set period, after which point your debts will be written off.
As your home is often your largest asset, the money from your home can be used to pay off a substantial amount of your debt.
Defaulting on a secured loan
There are two types of loan, secured and unsecured. When you take out a secured loan, you have to ‘secure’ it against an asset that will act as a guarantee. If you fail to keep up with your loan repayments, the lender can repossess the asset you have secured the loan against to clear the outstanding debt. In many cases, this asset with be your home.
If you’re struggling to keep up with secured loan repayments, you should speak to your lender and discuss repayment options. This should help to delay any legal action they may be considering taking against you.
Compulsory purchase order
While less common, a compulsory purchase order (CPO) can also result in home repossession. A compulsory purchase order is a legal process that allows certain bodies to purchase your land or property without your consent, if it is needed for development. This will only be allowed if the proposed development is considered to be of benefit to the public, e.g. a new motorway.
If your home is repossessed with a CPO, you will be compensated financially. A CPO can be challenged in court, during which time the organisation trying to purchase your property will have to demonstrate that there is a strong case in the public interest to reclaim the land your house sits on.
Breaching the terms of a lease
Properties in the UK are either freehold or leasehold. When you purchase a freehold property, you own both the building and the land itself. If you buy a leasehold, you are purchasing the rights to live in the property for the duration of the lease. The lease will have terms and conditions, especially pertaining to the payment of things like ground rent and service fees. If you fail to pay these charges, the owner could bring the lease to an end and consequently repossess the property.
How many houses are repossessed in the UK?
In 2009, home repossession levels reached a 14-year high. Easy credit availability and the creation of 125% home loans led to many homeowners borrowing at higher levels than before. When the financial bubble burst and higher interest rates kicked in, thousands of homeowners found themselves in severe financial difficulty. Since then, lenders have been forced to tighten up their lending criteria in a bid to stabilise the economy and UK property market.
Stricter lending criteria had the desired impact and saw a consistent fall in the number of repossession claims issued (the first step in pursuing a repossession order) up until 2016. The economic and political uncertainty that the UK has experienced since 2016 has had an impact, and repossessions claims are once again on the rise.
Find out more about:
- UK property market 2020: the impact of COVID-19
- Why can’t I sell my house?
- How to find out how much a house sold for
- A guide to property indemnity insurance
- Freehold vs leasehold – what’s the difference?
- House completion – the process
- Buying a house with subsidence
- Can I sell my home and rent it back?
- Structural survey – all you need to know
- What is a memorandum of sale?