Are you worried about your mortgage repayments? Are you finding that after everything else you have to pay for, there’s barely enough left to pay for your home? Is the word ‘repossession’ at the back of your mind? If so, you are not alone.
The cost of living crisis, the war in Ukraine, Brexit, our new Chancellor, jittery financial markets are all in the news. They are also having a real impact on our bank accounts and our day to day lives.
Being scared that you can’t make your mortgage repayments and might lose your home can feel really lonely. Don’t despair. Everyone is struggling right now. The cost of living crisis is making paying for anything – including mortgages – a lot harder.
There is no shame in not being able to make your payments. Don’t panic. Talk. There are people and organisations who will do everything they can to help you.
Here at Money Magpie, we’ve put together a guide on what it all means and what to do if you find you are struggling.
REPOSSESSION – What does it mean?
- Repossession happens when you miss your mortgage payments
- When you can’t repay your mortgage, the bank could take back your house because you can’t afford it.
- You will not be threatened with repossession as soon as you miss a payment. Your bank or mortgage lender usually give you a couple of weeks and will then contact you to chase the payment. This is called a ‘grace period’.
- If you still haven’t been able to pay after the ‘grace period’ has gone by, your lender will then contact you again about what happens next.
- If the bank or your lender start the process of repossession, it doesn’t happen overnight. The time between missing your last payment and being repossessed can take anything from a few months up to a year.
- This gives you time to find help and get advice on what to do next.
- Remember – losing your home is not inevitable – as long as you take steps to find a way to resolve the situation. However, if no solution can be found or agreed on, as soon as a court order has been made you will have 28 days to vacate your home.
What can I do?
Most importantly – do not ignore the problem – it will not go away on its own! It will get worse much faster if you don’t do anything.
- First – talk to your lender or mortgage advisor. They don’t want you to lose your home. Repossession is a last resort. They will work with you to find a solution.
- Even if your lender has already started court proceedings (getting a court order to repossess your home) – you can and should still talk to them about what you can do to pay what you owe.
- You may be able to arrange a new payment schedule that you can afford and that will mean you can stay in your home. If a court order is already being processed and you have agreed a payment plan, you will still need to attend court in order to explain what you have agreed to, to the judge. This is ok, it is just part of what happens.
- The law says your bank or mortgage lender has to consider any requests you make to change how much you pay them back each month and any offers you make to repay any and all missed payments.
- This means that you can tell them what you can afford to pay each month and they have to look at it carefully. It is better to do this and to show that you are willing to do what you can. It may not prevent repossession all together, but it could buy you more time.
CAN I SELL MY HOUSE TO HELP PAY MY DEBT?
- You can sell your home to cover the cost of the payment(s) you have missed. Only consider doing this if you house value is enough to cover those missed payments AND to leave you with enough to buy or rent somewhere that you can afford.
- You have the right to sell your home up until the point the lender takes possession, even if court proceedings have started.
- HOWEVER, do remember that selling your house can take time and you are not guaranteed a sale at all.
- There are organisations that will buy your house quickly, but you won’t get the full value – it will be a reduced price. Be careful when looking at these companies, make sure you read the small print and are fully aware of all costs and how much money you will actually be left with. The offers they make are usually very low, which is the price you pay for having the house taken off your hands quickly.
Court proceedings – what does this mean?
- Your bank or mortgage lender should first give you at least 15 days warning that they are starting court proceedings to repossess your house
- They will tell you the time and place of the hearing, as well as inform the local council about your situation
- Next you will get a defence form – this must be returned within 14 days of getting it. This lets you explain to the court why you think your house should not be repossessed and what you are doing to make your payments (both the ones you’ve missed and future payments)
- The hearing itself will take place in a judge’s chambers (the judge’s office or room)
- The judge will not grant an order to repossess your home unless there is no other option. They might grant a ‘suspended repossession order’ instead which will let you stay in your home as long as you make the payments agreed with your lender.
What happens if my house is repossessed?
- Your bank or lender will sell your house the best price they can get, usually they will use an estate agent, occasionally they may sell your property at auction
- Once your house has been repossessed you no longer have to make mortgage payments, but you can still be charged interest on what you owe until your house is sold
- If anything needs repairing or maintaining, your lender will take responsibility for these repairs but they can charge for this and add those charges to what you owe
- Once your house is sold, your lender will use the proceeds to clear the outstanding mortgage debt, pay any fees including legal and estate agent fees, and any bills for maintenance of the property. Once all debts have been paid, any money left over will be paid to you.
- Your local council must help you find a new home. If your bank or lender has started repossession proceedings, contact the council yourself to tell them what is happening. They should provide you with emergency accommodation or help you find a new permanent home.
What other help is out there?
The first step is to always start talking to your bank or mortgage lender. But you can also get advice from places like Shelter, Citizens Advice and the National Debtline.
Shelter gives free advice and support and their helpline is open all year round from 8am-8pm weekdays and 9am-5pm at the weekend. Ring 0808 800 4444 or if it’s an emergency and you are at risk of becoming homeless ring 0808 1644 660. There is also an online chat – click here. The website gives lots of useful advice too.
Citizens Advice – click here to find your local office or ring 0800 144 8848 in England, 0800 702 2020 in Wales (both of these lines operate weekdays only, 9am-5pm)
National Debtline provides information and advice about money matters 0808 808 4000 This helpline is open 9am-8pm weekdays and 9:30am-1pm on at Saturday. (Closed on Sundays.)
Government website – you can find information here about repossessions, your rights, emergency housing and evictions
You may be able to get help with legal fees under the ‘Housing Possession Court Duty’ scheme (England and Wales only). Your local council can give you advice about the scheme in your area.
Remember
- Talk to your bank or lender – they have a legal obligation to help you
- Be honest about what you can afford and when you can pay
- House repossession is a last resort – they don’t want to go through this process unless they have no other option
