What happens after house repossession?2023-09-07T09:47:40+00:00

What Happens After House Repossession?

Naturally, if you have been affected by the repossession of your house, you might be wondering what will happen next. Repossession for non-payment of a mortgage is, unfortunately, an unsettling event for individuals and families alike.

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What Happens After House Repossession?

Although various factors can lead to the repossession of a residential property, the most common cause is mortgage arrears – in other words, failing to make regular repayments. According to published statistics, between January and December 2020, a total of almost 4,700 homes in England and a further 399 homes in Wales were repossessed. There also appears to be a correlation between areas of lower average weekly earnings and home repossession.

In 2021 we saw a drastically lower amount of house repossessions due to Covid-19 deferral payments. However, the government have since ended the mortgage payment holiday on the 31st of July 2021.

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Life After House Repossession

To discover more about what happens following property repossession, read on. Below, we go through common FAQs and explain lenders’ legal duties, additional costs and legacy debts.

How many months in mortgage arrears before repossession?

If you are in mortgage arrears you’re behind with your payments. Once you are in arrears by at least 3 months, your bank or lender can begin the repossession process. If they are expecting their fourth payment this is when you can expect your bank or lender to initiate by contacting you and arranging a court hearing. All missed mortgage payments are recorded on your credit file.

So how long does house repossession take?

There’s no fixed period on how long it takes for a house to be repossessed, realistically it can take between 5 to 12 months. Especially if the market is currently stable, the lender will do their best to lose the least amount of money possible. Achieving this usually takes time.

What happens after your house is repossessed?

Once your house is repossessed by your bank or lender you will have to move out. Unfortunately, this could mean you are left homeless, in debt and with a damaged credit score.

The next step for the lender is to place the house back on the market. After a repossessed property is sold the proceeds of that sale cover the existing mortgage on the property.

If you fear that your house is about to be repossessed call us now or make sure to read our article: Applying for an N244 Form to Stop Repossession

How long does repossession stay on your credit report?

Repossession of your home will remain on your credit report for 7 years. The 7-year period starts from when you missed your first payment that initiated the repossession payment.

Legal Duty: Lenders

After a minimum of ninety days, mortgage payment arrears mean the lender has the right to repossess the property. Nonetheless, some lenders allow longer than this minimum. If the default in monthly payments continues and the lender gains court approval to take possession of the property, they must sell it for the best possible price and within a reasonable timescale. Usually, therefore, most repossessed homes tend to go on sale relatively quickly.

If you think you may be entering into mortgage arrears you need to speak to your lender, immediately!

In many cases, your lender will be empathetic to your situation. However, if you wait until you are over 3 months in arrears they may be less sympathetic. Any extension is at the discretion of your lender.

Additional Costs

Additionally, lenders often pass on costs such as court fees, depending on the mortgage loan contract. Once a court makes a possession order, the payment of monthly mortgage instalments usually ceases.

Rather than fix the asking price itself, the bank, building society or other financial institution will probably take expert advice from a local valuation service. While some properties sell through the usual estate agency channels, others go to auction. Typically, lenders might choose to auction property to achieve a quick sale.

Responsibility for taking care of the property passes to the lender that has taken possession until they sell it to a new purchaser. However, although lenders have to pay for basic maintenance and essential or emergency repairs during this time, they are entitled to pass the cost on to the mortgagor, i.e. the previous owner-occupier. If they do recharge in this way, they add the sum(s) to the mortgage account.

After the Sale

After selling the property concerned, any money remaining after settling the mortgage loan, fees and selling expenses is repayable to the borrower. Lenders have to notify customers of such entitlements, except when it is not possible to contact them. If a lender does not have the new address, for instance, they or a court will hold the money until they can contact the ex owner-occupier and return the balance.

After repossession, debt problems do not necessarily go away. Notably, depending on the sale price – along with any additional charges and interest – the proceeds might not be enough to settle the mortgage. In some cases, an outstanding balance might remain due. If so, the lender has to notify the borrower. Whether the lender pursues the borrower for the remaining balance or not will depend on the company policy and the circumstances.

Six-Year Limit

Sometimes, lenders may decide not to pursue payment. However, should they decide to do so, they must inform the borrower within a maximum of six years.

Finally, if the lender decides to use another company or a debt collection agency to attempt to recover the amount due, they must notify the debtor. Assuming that the mortgage lender has the new address details, they must also send out statements that itemise any further interest charges.

How to Stop Repossession

Make sure you talk to your lender

1. Don’t take emergency finance

Other companies may have misled you into believing that a bridging loan or short-term finance is your best or even only choice. That’s not true. The temporary relief will be short-lived when you are facing repossession for a much higher sum.

Try not panic and stay calm

2. Don’t accept a quick sale

In desperate situations, you may be tempted to accept a below-market-value “instant cash” offer on your home. Avoid quick sale companies at all costs—they profit from your misfortune. We can provide better options.

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3. Get us to help

We can help you navigate through your options. We will force your lender to give you time to make a decision that suits you. Our first step is to assess affordability for you to keep the property long-term. If this is not an option, then we will ensure you speak to regulated finance professionals or have time to sell your property on the open market.

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