Some Repossession Facts and Myths
Thousand of apartments, flats and houses are subject to repossession proceedings every year, but many myths surround the subject.
Despite oft-heard rumours to the contrary, homes cannot be repossessed without warning. Homeowners who have mortgage arrears first receive a letter from the lender, after which there is usually an interval of some two to six months before any legal proceedings commence. Debt collection agencies cannot repossess properties, as only a court can grant such orders if the mortgage is on a residential basis.
Notably, it may be possible to stop repossession by negotiating with the bank or building society concerned and agreeing to:
- Pay off arrears over time.
- Refinance the property.
- Sell the property.
Caution is necessary; handing the keys to the property back to the lender will not end the matter. Mortgage lenders can still pursue debtors for up to twelve years in England and Wales and up to five years In Scotland if there is a shortfall after the property is sold.
Additionally, many Homeowners believe that if there is equity in the house, then the Lender will keep the proceeds from the sale. This is not the case, if there is a balance released after the house is sold, then it will be sent back to the Homeowner, however, it is going to be significantly reduced from what should be available if you sold the property for yourselves due to:
- The increased solicitors and court costs added to the mortgage.
- The Asset Management Company and estate agents costs for selling the property.
- The increased charges made by you Lender for coordinating the solicitors and Asset Management Company.
- The significant reduction in the sale price due to it being a repossessed property.
Of course, this does not even account for the time delay in the Lender selling your property and finalising your account and property title. Most Homeowners that are fortunate enough to get some money back, have to wait over 8 months, during which time, no assistance is available for being rehoused.