How to Prevent Repossession
Even with advance notification, the threat of repossession is ominous and – for many – quite distressing. Nonetheless, mortgage providers must make a reasonable attempt to help borrowers resolve their arrears before that stage. If you are concerned about mortgage payments and need to know how to avoid repossession of your house, read on. Below, we offer immediate practical advice.
It is essential to maintain regular contact with your bank, building society, or other mortgage company. Arrange a meeting to try to agree on a payment plan that is affordable, fair and acceptable to the lender. It also pays to seek expert advice to prevent repossession, as soon as possible. Impartial advisors will help you to decide on the best option for your circumstances.
Initially, to stop repossession of your home:
- Agree a repayment plan
- Wherever possible, try to improve your financial situation
- Maintain a dialogue with your lender
In reality, most lenders prefer to reach an agreement with their borrower to set a new level of repayments, as opposed to repossessing as a first option. Lenders have to allow time for the borrower to improve the situation.
If possible, prepare a budget, write a financial statement and find ways to improve your finances. It is best to make regular payments, even if less than the previous amount, as they demonstrate reliability and responsibility in managing a monthly budget.
In communications with the lender, explain how the arrears situation has arisen. Also, detail what efforts you intend to make to pay off the outstanding amount.
If you agree, it may be possible for the lender to:
- Delay interest payments
- Change the type of mortgage
- Extend the loan term
Lenders have to keep records of their written correspondence and logs of telephone conversations with their customers. Additionally, they must provide detailed statements showing transactions, interest and other charges.
In particular, consumer law and an approved code of practice require UK banks, building societies and other financial services companies to follow laid down procedures. Their adherence to the guidelines and legislation is subject to monitoring by the FCA (Financial Conduct Authority), which is also responsible for handling complaints.
More Options to Avoid Repossession
Although it will not usually be the first choice for owner-occupiers with families, one option is to sell the property. Deciding to sell means one can control the sale better. In contrast, after repossession, most residential properties do not tend to realise the same selling prices.
Alternatively, in some cases, it could be practical to let out a spare room to a lodger – or rent out the entire house or flat. If you decide on the latter, it is vital to have a legal agreement drawn up first.
Most experts advise avoiding voluntary repossession, i.e., handing the keys back. Surprisingly, many homeowners are not aware that this precipitate action does not mean the end of the matter. Even if one hands the keys over, the liability for monthly instalments continues unabated. Defaulting on payments affects one’s credit record and subsequent ability to borrow, too. Then there are costs such as building insurance and routine maintenance, apart from the lender’s selling expenses. Furthermore, in these circumstances, ex-owner occupiers who then apply for local authority housing might find themselves deemed to have made themselves homeless intentionally.
Insurance and Entitlement to State Support
Finally, if you have a mortgage payment protection policy in force, check its terms to consider an insurance claim. Similarly, if you are suffering from an illness or disability, you could have a valid entitlement to financial assistance and support through state benefit. Notably, it is a good idea to inform the mortgage lender. Not least, lenders must not initiate possession proceedings if a benefit claim is likely to be successful.