1. Missed Payment(s)
If you miss a monthly payment, the lender will contact you. Typically, the bank, building society or other mortgage company will ask how you plan to pay back the amount due. At this stage, it is a good idea to get some debt advice so that you understand all the options available.
Wherever possible, try to keep channels of communication open with the lender. Check your domestic budget, including all income and expenditure. Look to prioritise paying off debt(s) and prepare a financial statement, with help if necessary.
In dialogue with the lender, try to agree affordable continued repayments, perhaps of an amount lower than before. Depending on the mortgage contract and lender, you could change the type of mortgage – or take a payment holiday. Alternatively, you might conclude that the mortgage is not affordable and, therefore, ask the lender to give you time to sell the property.
2. Lender Initiates Possession Proceedings
Repossession should only occur as a last resort when a lender is unable to agree a repayment plan. Throughout the financial sector, codes of practice regulate service providers, including mortgage lenders. This framework means that the bank or building society must give you a detailed statement that lists payments, interest and other charges as well as the sum outstanding.
3. Court Notification
To commence legal proceedings for possession, the lender will apply to the district court. In turn, the court then sends a summons notice out with details of the place, date and time. From receipt of the document, there is typically an interval of some three to eight weeks until the hearing.
4. Attend the Hearing
It is essential to attend court on the day. Notably, owner-occupiers who are in payment arrears and who do not turn up for court hearings are at a severe disadvantage because the lender usually gains a possession order.
During the hearing, your legal representative will support you. If you do not have a representative, you could ask for help on the day instead, through the court duty scheme.
5. The Decision
During the hearing, the judge will listen to the facts and consider the alternatives, in the circumstances. He or she will listen to both sides of the argument; the fact that a lender has applied for a repossession order does not mean that the court will automatically grant one.
Then, the court will likely decide to make one of two types of possession order:
- A suspended order, where you continue to live in the home on specific terms. To address the arrears, the court will set an amount on top of the normal monthly mortgage instalments.
- An outright order. More seriously, these set a date to leave the property.
However, in some cases, the lender’s action may be adjourned or dismissed.
6. Eviction by Bailiffs
If the court grants an outright possession order, or if the owner-occupier breaks the terms of a suspended order, the lender can apply for an eviction warrant. If granted, the mortgagor (i.e., the owner-occupier in arrears) then receives an official notice. Unless avoiding action is successful, eviction could then occur in fourteen days.
Sale of the Property
Following an eviction, the mortgage lender would look to sell the property. After receiving the sale proceeds and paying off the outstanding mortgage, bona fide costs and secured creditors, the ex-owner receives any remaining funds. Conversely, in the event of a shortfall, he or she remains liable for paying the remaining balance.