How to Stop Repossession of a House
The Ultimate Guide
The need to stop repossession is becoming an increasingly common concern, with county court bailiffs seeing a 24% rise in repossessions during 2023 compared to 2022. The ripple effects of repossession extend far beyond losing a place to live; they tarnish credit histories, strain emotional well-being and threaten the very foundation of family stability.
Repossession is triggered when homeowners find themselves unable to keep up with their mortgage payments. The lender, seeking to recover their outstanding debt, initiates a legal process to reclaim the property. However, this process can stretch over several months, offering homeowners a valuable window to rectify the situation.
Our Ultimate Guide aims to demystify home repossession, providing vital knowledge about how the process works. This provides actionable steps and insights that could potentially stop repossession or at least mitigate its impact for you.
Quick Page Navigation
- Why do houses get repossessed?
- How does the house repossession process work?
- What are the consequences if you are not able to stop repossession?
- How can you stop repossession?
- Should you sell your house to stop repossession?
- Estate agent sales: a viable path to stop repossession?
- Auction aales: a quicker option?
- Quick house buying companies: a hassle-free solution to stop repossession?
- Coping with life after house repossession
- In summary
Why do houses get repossessed?
To understand home repossession, we first need to look at why houses get repossessed.
The repossession process starts when the owner of a property fails to service a debt secured against it having stopped making regular payments. This normally takes the form of a mortgage used to purchase or refinance a home where the property itself serves as the security for the lender.
Ordinarily, mortgages require regular monthly payments to “service” them. These payments will cover the monthly interest charged, as well as any planned repayment of the debt and service fees associated with the mortgage agreement.
If you fail to service your mortgage, the law provides a pathway for the lender, usually a bank or building society, to repossess the property against which it is secured. This enables the lender to recover their loan and eventually sell the property. This could be either via a high street estate agent or auction company.
Lenders will always first serve a formal notice about unpaid payments. These are often called mortgage arrears. The lender will attempt to secure payment before resorting to repossession of a property. However, if as the borrower, you then stick your head in the sand, avoid any communication, and make no attempt to arrange for the debt to be repaid, the creditors can apply for a court order to take possession of your property.
Provided the court agrees that the case is legitimate, it will set a final date for the payment of arrears. If the arrears are not paid within this time, the mortgage provider can then apply for a warrant of possession from the court. This authorises bailiffs to act on the lender’s behalf and force eviction of all occupants.
House repossession in summary
- If a mortgage continues to not be paid, a mortgage lender may start a process to take back your property. This is known as home repossession.
- The lender will issue a notice about the missed payments stating how much is owed.
- If you do not respond or pay, the lender can go to court to ask for permission to take the house back. This is so that the property can then be re-sold to recover their loan.
- If the court agrees with the lender, they will set a date by which you will either need to pay or leave the property. If you fail to leave, the bank can then legally send bailiffs to enforce an eviction. They will then give you 7 days in which to meet back at the property to collect any personal items.
What are the most common reasons for missing mortgage payments?
An inability to keep up with mortgage payments normally stems from financial hardships, normally income losses or unexpected expenses. These are the reasons why there are as many as 24% more properites having been repossessed in the first quarter of 2023 compared to 2022.
These hardships can be caused by lots of things including the loss of employment, unexpected or emergency expenses, and major life events such as a separation, divorce or death.
Larger-scale economic circumstances can also play a role in some homeowners struggling to keep up with their mortgage. Upward changes in the Bank of England interest base rate can dramatically alter monthly mortgage payments. This particularly affects variable-rate mortgages, as these are tied to the performance of the wider economy.
While good financial planning and keeping spending to a minimum can help avoid mortgage arrears, even these steps may not be enough to overcome a bad financial storm that ultimately leads to the need to stop repossession.
How does the house repossession process work?
The home repossession process has definitive steps that are followed. Every step needs to be completed before the next stage can begin.
A property repossession typically takes several months and there are actions you could take at each step to try and keep your home.
By understanding the process, your position within it, and what will happen next, you may be able to figure out the best way to proceed.
Step 1: You miss a number of payments on your mortgage
The repossession process typically starts very shortly after you have missed several repayments on your mortgage.
Provided you take action quickly by making a substantial payment or agree a payment plan with your lender, the bank or building society will often work with you and at worst may charge a small fee.
However, if action is not taken, the mortgage lender will attempt to make contact.
Step 2: Initial contact is made with your lender about a missed payment
If you miss a mortgage payment, the lender will usually send a letter, called a “default notice.”
After one month:
- The risk of losing your house is very low.
- Under Government guidance, all residential mortgage lenders now have to try and agree with you on how and when the missed payment will be paid back. If you are finding it difficult to make payments, your lender should give you some time to make the payment and see if a new payment plan can be agreed. This may include delaying interest payments, increasing the overall term of the mortgage or switching from a repayment mortgage to an interest-only loan.
After two months:
- The lender will try harder to get you to agree on a repayment plan.
- If you want to avoid losing your property, you must communicate with your mortgage lender and find ways to fix the problem. At this point it can be a good idea for you to seek professional financial advice. A good first port of call is your local Citizens Advice Bureau who can offer specific help in dealing with mortgage arrears to stop repossession.
After three months:
- If no agreement on repayment is made, the lender will think about starting repossession proceedings against you.
- At this point you really must act to fix the situation, as going to court could lead to being forced out of your home.
Step 3: Your lender starts court action
If you do not agree a repayment plan with your lender within the first three months of missing mortgage payments, the bank will more than likely resort to going to court to take your house back for resale.
- Court action is usually taken as a last resort option when the lender thinks they will not get their money back.
- Before going to court, the lender has to provide you with a list of missed payments, the total amount overdue, and the total outstanding mortgage debt. They also need to inform you that they are starting the repossession process and advise you to contact your local council for help should you feel you may become homeless.
- If the lender does not follow these steps, you can complain in writing and contact the Financial Ombudsman Service. This service can help find a fair repayment plan and make the bank pay your court fees if the lender is deemed to have done something wrong in their overall actions.
- The lender might wait before acting if you are waiting for financial help like benefits, universal credit, a loan to help pay the mortgage interest, a payment from insurance that covers mortgage payments or help from your local council.
Step 4: The court serves paperwork on you
Provided the mortgage lender’s application for a property repossession is successful, the court will send several forms and documents to you by post.
The documents include:
- The claim Form N5, which is used to indicate the property address being repossessed, when the possession hearing is being held, and why it is being held.
- The particulars of claim Form N120, which details the mortgage agreement, amount repaid and owed, and the details of the missed payments.
- And the Defence Form N11M. In this form, you are asked to write all the details relevant to the case. This includes if you disagree with any claims made by your lender, if you are claiming or applying for any benefits, your regular income and expenditure, and if you have any priority debts. In addition, this form should be used to tell the court about the events which led up to your mortgage arrears. This could include explanations of divorce, illness, redundancy, bereavement or bankruptcy.
Step 5: The possession hearing
During the possession hearing, both the lender and yourself present your cases to a judge. The attendees include the lender’s representative, the judge, yourself as the borrower and your legal counsel. If you cannot afford legal counsel, you can request assistance from a duty advisor at the court.
During the hearing, you can:
- Demonstrate your ability to repay the debt, which may lead to a judge-ordered repayment plan to stop repossession.
- Request a delay in repayments to secure funds by:
- Selling the house, or
- Acquiring necessary money through other means, like a new job.
For these actions, the court will need evidence, such as an estate agent’s contract or a new job offer letter.
It is imperative that you attend the hearing. Your absence is likely lead to a judgment in favour of the lender, and to them being awarded outright possession of your property.
Step 6: The court’s decision
Depending on the situation, the judge can make several decisions at a possession hearing.
They can order your property to be repossessed, through either an outright order or a suspended order.
- An outright order passes ownership to the lender and sets a date for you to leave, often as soon as four weeks after the hearing.
- A suspended order allows you to maintain possession of your property, provided you follow the repayment terms set by the court. This is typically a set amount in addition to the your typical monthly mortgage costs. This is to cover the arrears owed and the court costs incurred by the lender.
- Occasionally, the judge may adjust the mortgage terms to make them more amenable, typically facilitated through a Time Order. This is often done if you are trying to sell your property or have a prospective increase in income. This can be a great way to stop repossession quickly without too much disruption.
The judge can also
- Order a delay, known as an adjournment. They do this if they do not have enough information to make a sound decision. Typically, the party at fault has to pay more court fees if this happens.
- and finally, if they find the lender has not followed the proper procedure, they can dismiss the case.
Step 7: Eviction
If the court issues an outright order, or if the terms of a suspended order are violated, the mortgage lender, now the legal owner of the property, can apply for a warrant of possession from the court.
The lender must provide at least 14 days’ notice of the impending eviction as per the regulations in England and Wales. Bailiffs will issue a notice on the property indicating the date and time when the eviction will occur.
Step 8: Sale of the property by the lender
Once a mortgage provider takes possession of a property, they are mandated to sell it for the best price they can. You will not need to make any further mortgage repayments as these will be halted whilst the sale process takes place. However, you will still be liable for all of the mortgage’s costs to date until the sale has completed.
The sale proceeds are used to cover your mortgage debts and any other loans secured against your property. The proceeds will also be sued to cover the lender’s legal costs, agent fees, and the property’s maintenance costs, with any remaining money being passed back to you.
If the sale proceeds do not cover their debts due to negative equity, a mortgage shortfall occurs, and you will still owe this money to the lender.
What are the consequences if you are not able to stop repossession?
The repercussions of a home repossession can extend beyond the loss of the home itself and can have a lasting impact on your financial and personal life.
This chapter delves into the implications of house repossession.
- The immediate fallout is home loss, triggering emotional distress and family instability.
- Homes harbour personal belongings, and repossession risks losing these. Although lenders must legally provide a timeframe for belongings retrieval, post-expiry, they may dispose of them.
- Securing new housing may turn daunting as landlords typically vet credit histories and a repossession record could be off-putting.
- Often, financial strains post-repossession necessitate downsizing, making it challenging to meet family or storage needs.
- Should you live in desirable area you may find yourself having to move quite far away from your original homes and support networks to find affordable accommodation.
- If the sale of the repossessed property does not cover the outstanding mortgage and repossession charges, the debt balance remains with you.
- Repossession tarnishes credit scores, hindering future loan approvals and escalating interest rates on any new credit, with the impact lingering on credit reports for up to seven years.
- Court proceedings during repossession add legal costs, and any mortgage payment irregularities could invite more legal woes, escalating debts.
- Some sectors, notably finance, scrutinise credit histories during hiring, potentially jeopardising job opportunities for individuals with a repossession record.
Emotional and Social Toll:
- Repossession stigma may foster social alienation and emotional distress, adversely affecting mental health.
- Post-repossession, securing a new mortgage becomes arduous as lenders might view you as high-risk, either declining your application or charging hefty interest rates to mitigate risk.
- Insurers often assess credit scores when determining premiums; hence, a credit dip post-repossession may inflate insurance costs.
- Family members, particularly children, could face emotional, social, and academic hurdles due to the upheaval from repossession and altered living arrangements.
Long-term Financial Goals:
- Repossession can thwart long-term financial planning, affecting retirement savings, education funds, and other financial objectives.
How you can stop a house repossession?
While having your home repossessed can have devastating consequences there are many things you can do to stop it from happening.
By taking proactive measures and paying attention to your financial situation you may avoid repossession under all but the worst circumstances.
Step 1: Understanding your financial situation
Preventing a house repossession starts with a firm grasp of your financial situation. Understand your income, expenses, and potential financial challenges to avoid unexpected mortgage payment issues.
If debt is a concern, itemise all obligations like credit cards and loans. Consider debt consolidation under a low-interest product, but exercise caution with companies offering this service.
While keeping a savings buffer for emergencies is prudent, the challenging financial landscape of the 2020s may make this difficult. If possible, attempt to start building up a reserve each month.
Step 2: Sorting your finances/paying off your arrears
Easier said than done, this step involves raising enough funds to pay off your arrears in full.
While in the short term, this might be achievable through taking out more debt, for a long-term solution, additional income or cuts to expenses are required.
One way in which you could increase your household income is by taking in a lodger, who pays you rent for the use of a spare room. You should check your mortgage lender is happy with this before proceeding. Sometimes taking in a lodger can be against the terms of your mortgage agreement.
Step 3: Understanding your rights and obligations
Understanding how best to proceed when at threat of home repossession often depends on understanding your rights and obligations, as well as those of the lender.
It is easier to navigate through the threat of home repossession with a clear understanding of both yours and your lender’s rights and obligations. Here is a simplified breakdown:
Your rights and obligations as a borrower:
Right to information: Your lender must provide clear details on missed payments, outstanding mortgage debt, and total arrears before starting any repossession actions against you. They should also advise you to seek homelessness help from your local council if needed.
Right to propose repayment: You can propose a repayment plan for the arrears, which your lender is obliged to consider. If rejected, the lender must explain their decision in writing within ten working days.
Right to seek a delay for financial help: If awaiting financial assistance like Universal Credit or an insurance payout, your lender should consider delaying court action. The same delay applies if you are receiving debt advice or expecting an improvement in your overall finances.
Right to seek a delay for home sale: If selling your home to clear the debt, your lender should pause court action. You must then ensure your home is marketed at a realistic price and permit your estate agent and conveyancer to communicate with your lender.
Right to complain: If you believe your lender is being unfair, you can complain to the Financial Ombudsman. Your lender should wait for the ombudsman’s decision before proceeding with court action.
Obligation to communicate: It is your responsibility to stay connected with your lender, especially if you are facing financial difficulties.
Obligation to repay: You are obligated to honour the repayment terms of your mortgage agreement.
Your lender’s rights and obligations:
Right to repayment: Your lender has the right to expect timely repayments as per your mortgage agreement.
Right to initiate repossession: In the event of continued missed payments, your lender has the right to initiate the repossession process, following the correct legal protocols.
Obligation to inform: Your lender must provide clear information about your mortgage situation before initiating any court action.
Obligation to consider repayment offer: Your lender should carefully consider any repayment offer you make.
Obligation to wait when necessary: Court action should be delayed if you are awaiting financial help, selling your home, or have lodged a complaint with the Financial Ombudsman.
Obligation to communicate: Your lender should maintain communication, especially regarding any court actions related to repossession.
Obligation to explore other options: Other options like altering your mortgage terms or waiting for a home sale should be considered.
Understanding these rights and obligations will empower you to take the necessary steps to prevent a house repossession. Remember, open communication with your lender and seeking professional advice are crucial steps in navigating these challenging circumstances.
Step 4: Leveraging external support
To stop repossession in it’s tracks can be overwhelming, but it is essential to remember that numerous external institutions and bodies are willing and able to provide various forms of assistance, ranging from debt counselling to financial advice and loans.
By reaching out to these organisations, you may significantly alleviate the financial strain and legal complexities associated with the repossession process.
Here we list a couple of organisations you may want to get in touch with;
- StepChange and National Debtline: Specialise in free, impartial debt counselling, offering services like debt management plans, advice on dealing with creditors, and information on insolvency options.
The Support for Mortgage Interest (SMI) Scheme:
- Scheme overview: A UK government initiative assisting homeowners unable to cover interest payments on their mortgage or certain home improvement loans by providing a loan for the interest amount.
- Eligibility criteria: Available to individuals out of work, at State Pension age, or receiving specified benefits like Universal Credit or Pension Credit.
- Loan amount and repayment: Supports interest on the first £200,000 of the mortgage (or £100,000 if receiving Pension Credit) with a government-set interest rate; SMI loan is to be repaid, with repayment terms varying.
- Application process: Administered by the Department for Work and Pensions (DWP), apply through the DWP website or contact your local Jobcentre Plus.
- Solicitors: Specialising in property law, providing invaluable guidance, clarifying legal protections, navigating the repossession process, representing in negotiations with lenders, or in court, and ensuring rights are upheld.
- Cost-effective legal support: Legal aid organisations provide free or low-cost legal advice and representation on repossession matters.
Professional Financial Advisers:
- Value-driven financial guidance: While there is a cost, the value of restructuring debts, negotiating with lenders, and long-term financial planning can be significant. Some offer free initial consultations or sliding scale fee basis based on income.
- Contact: Look for reputable financial advisors through The Chartered Institute for Securities & Investment (CISI) or The Personal Finance Society (PFS).
Community Financial Advice Services:
- Free financial advice: Providing budgeting advice, debt management, and financial planning often at no cost.
- Contact: Search online or inquire at local community centres for referrals.
Local Authority assistance:
- Repossession advice: Local authorities offer free guidance on rights, the repossession process, and connections to local support schemes or charities.
- Alternative housing solutions: They can also help in finding alternative housing solutions post-repossession.
- Financial support and referrals: Finally, they also can provide access to financial support schemes, budgeting advice, and referrals to legal aid and debt counselling services.
- Contact: Reach out to your local council’s housing department or check the Local Council Directory for contact details.
Step 5: Talking to your mortgage lender
By talking to your mortgage lender, you might be able to arrange a solution to your financial problems and stop repossession altogether.
Open communication is pivotal when facing financial difficulties that could lead to a property repossession. Here is how you could approach this:
Understand your mortgage agreement: First, familiarise yourself with the terms of your mortgage agreement, particularly clauses related to overdue payments, defaults, and repossession.
Prepare documentation: Gather all necessary financial documents including proof of income, expenditure, and any unexpected financial hardships you may have encountered.
Schedule a meeting: Request a face-to-face meeting with your lender to discuss your financial situation. This is often more effective than phone or email communication.
Propose a plan:
- Assess your finances, create a realistic budget, and determine what you can afford to pay towards your mortgage each month.
- Develop a clear repayment plan outlining how you will catch up on missed payments, with a timeline for achieving this.
- Consider extending your mortgage term or making other arrangements, such as debt restructuring or switching to an interest-only mortgage and consult with a financial adviser to refine your plan.
- Present your plan to your lender, be open to negotiations, and maintain positive, open communication throughout the process.
Keep records: Document all communication with your lender, including dates, names of representatives, and the content of your discussions.
Follow-up: If you have agreed on a new repayment plan, be sure to adhere to it. Keep your lender updated on any changes in your financial situation.
Should you sell your house to stop repossession?
The prospect of home repossession can be frightening.
One avenue to avoid this dire scenario is to sell your home before the repossession process starts. This could provide you with the funds necessary to settle your debts and move on fairly quickly.
Here we explore the ramifications of making such a decision.
Advantages of selling your home to avoid repossession:
Selling your home to settle mortgage debts can be a proactive step. By doing so, you could avoid the legal repercussions and emotional distress associated with repossession and preserve your credit rating. This could make it easier to secure housing and finance in the future.
Disadvantages of selling your home:
On the other side, selling your home, especially in a rush, could lead to a financial loss. Your urgency to sell may not help you fetch the best market price. Post-sale, finding another place to live can also be challenging, especially on a tight budget. The emotional impact of moving, particularly on families, can also be significant.
Factors to consider:
Several factors come into play when considering selling your house to avoid repossession:
- Market conditions: The current property market conditions in the UK may impact the selling price of your home. If prices have recently slumped, it can often be best to try and avoid selling up.
- Your financial situation: Assess your financial standing, considering other debts and financial obligations. Can you find a way of keeping your house? In some circumstances, selling is not the best option.
- Mortgage amount: Be clear on the remaining mortgage amount to understand how the sale proceeds would cover the debt. When the sale proceeds can no longer cover the debt, this is described as negative equity.
Negative equity and it’s implications:
Negative equity, where your home’s value is less than the mortgage owed, presents a complex scenario:
- Impact on sale: Selling in a negative equity situation could result in you still owing money to your mortgage lender post-sale.
- Professional guidance: Consult with financial advisers or legal professionals to explore your options and understand the legal and financial implications involved.
Preparing for a sale:
Selling a home is a hefty task. Here is how to prepare:
Ensure you are accurately pricing your property: Pricing your home accurately is crucial to attracting buyers while ensuring you get a fair deal.
Seek professional advice: Seeking advice from professionals, including estate agents and solicitors, can guide you through the sales process, ensuring you adhere to legal requirements and make informed decisions.
Sales methods: Different sales methods like selling through estate agents, at auctions, or to quick sale house buying companies each have their pros and cons, offering advantages and disadvantages.
Here we look at this further.
Estate Agent sales: A viable path to stop repossession?
Estate agents serve as intermediaries in property transactions, helping to connect sellers with potential buyers. They use their expertise in the property market to help sellers get the best price for their property and ensure a smooth transaction process.
How Estate Agent sales work:
- Listing and marketing: Estate agents begin by listing your property on various online platforms and in their agency’s window. They determine the advertised price based on factors like the location of your property, its size, condition, and the current local housing market. They then sell your property, using professional photographs, descriptions, and advertisements to attract potential buyers.
- Viewings and negotiations: Agents organise viewings for interested parties and negotiate offers on your behalf. They use their understanding of the local market to set a competitive price, negotiate favourable terms, and manage any bidding wars that might arise to ensure you get the best possible price.
- Legal liaison: While they do not handle legal aspects, estate agents liaise with legal representatives to ensure all paperwork is accurate and complete, streamlining the sales process. This liaison is crucial as it helps in adhering to legal requirements and facilitating a smooth transaction.
Costs associated with Estate Agent sales:
Estate agents charge a commission for their services, which is usually a percentage of the sale price. The commission rate can vary, but it typically ranges from 1% to 3% of the sale price. This cost is crucial to consider, especially when finances are tight due to pending repossession.
Market conditions and court timelines:
The state of the UK housing market can significantly impact the feasibility and success of selling your home through an estate agent to avoid repossession. Current market conditions might affect the selling price and the speed at which your home can be sold. For instance, in a seller’s market, homes may sell faster and at higher prices, whereas, in a buyer’s market, homes may take longer to sell and fetch lower prices.
Courts in the UK may grant a timeframe ranging from 3 to 12 months for individuals to sell their homes to avoid repossession. In a hot market, with a more conventional property, three months to sell is perfectly achievable, but if you are in a cold market, or selling a less traditional property it can prove challenging.
If you find yourself attempting to sell a less traditionally desirable house on a short timeline, you may find an open market sale carried out by an estate agent is not suitable for your needs.
Auction Sales: A quicker option?
Auction sales can offer a faster route to sell your property, especially when facing a repossession deadline. This method involves selling your property to the highest bidder within a designated timeframe.
Here we delve into how home auction sales work, the costs involved, and explore their suitability for homeowners facing repossession.
How Auction Sales work:
- Advertising: Your property is advertised to potential bidders. The auction house will determine a Guide Price, which is an estimate of what the property might fetch. A Reserve Price is usually set which is the least you are prepared to sell for.
- Viewings: Interested buyers have the opportunity to view the property before the auction. Presenting your property in the best possible light can attract higher bids.
- The auction event: On auction day, bidders compete to offer the highest price for your property. The highest bidder at the fall of the auctioneer’s gavel wins provided the bid meets or exceeds the reserve price (the minimum price you are willing to accept).
- Completion: The winning bidder pays a deposit, usually 10% of the sale price, and commits to completing the purchase within a specified period, typically 28 days.
Modern Method of Auction vs Traditional auctions:
- Traditional auctions: As outlined above, traditional auctions involve a live bidding process, either in person or over the phone, where the highest bid at the fall of the gavel wins.
- Modern Method of Auction (MMoA): This is an online auction format where buyers can place bids on a property over a set period. MMoA often allows for a longer completion period, typically 56 days, which can be appealing to buyers who may need extra time for financing. This method also allows for a more extended marketing period before the auction, potentially attracting more bidders.
Costs associated with Auction Sales:
- Entry fees: There might be a fee to list your property in the auction catalogue.
- Commission: Auction houses charge a commission, around 2.5% of the sale price, though this rate can vary.
- Reserve Price setting: Setting a realistic reserve price, or minimum price you will accept, is crucial. Too high, and your property might not sell; too low, and you might not cover your debts.
- Property appeal: Unique or hard-to-sell properties might find interested buyers in an auction setting, where the allure of a deal can drive bidding.
Auction sales can offer a faster route when selling your property to stop repossession, making them a viable option for homeowners on tight court-imposed deadlines. However, the uncertain final sale price and the costs involved require careful consideration.
House buying companies: A hassle-free solution to stop repossession?
Quick house buying companies, also known as home buying companies or professional property buyers, can offer a faster, more straightforward solution if you simply need to sell your property quickly, and especially when facing the urgency of repossession.
Property buyers either buy homes directly or sell these on to one of their preapproved investors. This can cut out many of the traditional steps involved in selling a property.
Here we look at how the professional homebuying process works, its pros and cons, and its suitability in the context of avoiding repossession.
How quick house buying companies work:
- Initial contact: You reach out to a quick house-buying company either completing an online form or via telephone. At this point you provide details about your property and your situation.
- Offer generation: The home buying company evaluates your property, often with a quick online process and makes an indicative cash offer. This offer is typically below market value due to the speed and certainty it provides. After all, any home buying company is only going to purchase a property where they can see there is room for a profit to be made once they re-sell it.
- Acceptance and completion: If you accept their offer, the company proceeds to complete the purchase, often within just a few days or weeks depending on the urgency of your situation.
- No upfront costs: Unlike traditional sales methods, selling to a quick house-buying company usually involves no upfront costs. The company often covers legal fees and other associated costs.
- Reduced offer: The trade-off for speed and convenience is that the offer price will be below the market value of your property.
Timeframe and court timelines:
Quick house buying companies can often complete purchases in a timeframe as short as 7-14 days, making them a potentially suitable option for homeowners facing imminent repossession deadlines imposed by a court.
- Speed: The process is faster than traditional selling methods, providing a quick solution in urgent situations.
- Certainty: Your house sale is more likely to go through without hitches as property buying companies employ their own cash funds. This eliminates the need for mortgage finance or house chains often associated with traditional property sales.
- Reduced sale price: The homebuyers offer will be below the market value of your property. However, an independent survey will confirm both the open value of your property and you can then make an informed decision on whether or not to accept the company’s cash offer.
- Less competitive: Unlike auctions or traditional sales, there is not a competitive bidding process that might drive up the price.
- Cannot help people with little equity: Generally, cash buyers operate by offering around 70%-80% of their property’s value. If you have less than 20% equity in your property, a cash buyer will usually not be able to help you.
Reliability concerns: The quick house-buying sector is known to have some reliability issues. Despite several campaigns to impose tighter restrictions, the industry remains unregulated, leaving room for rogue traders. Some companies may provide misleading information, change the offer price at the last minute, or have unclear fee structures.
Due to a few unreputable companies, the sector has acquired a negative reputation, although many legitimate companies operate within it. One thing these firms are known for is to offer to buy homes, and then change their offer at the very last minute when you have no option but to sell.
How to cope with life after repossession?
Home repossession is a difficult and emotionally draining experience. It is not just a loss of property, but a change in your life circumstances that might carry a stigma and affect your self-worth and emotional state for some time.
However, life does continue, and it is essential to find ways to cope, recover, and rebuild.
Here is a structured approach to navigating life post-repossession:
Understanding and accepting the situation:
- Acceptance: It is essential to accept the reality of the situation. Denying it or dwelling on what could have been done differently will not change the present circumstances.
- Emotional impact: It is natural to feel a range of emotions from anger, and sadness, to embarrassment. Seeking support from family, friends or professional counselling can be beneficial in processing these emotions.
- Learning: Reflect on what led to the repossession of your property and what could be done differently in the future to prevent similar situations.
Rebuilding financial stability:
- Budgeting: Create a realistic budget to understand your income and expenses. Managing a budget is crucial to avoid falling into financial hardship again.
- Debt management: If you have other debts, consider speaking with a debt advisor to develop a debt management plan. It is essential to address all financial issues to rebuild stability.
- Credit score: Monitor and work on improving your credit score. Repossession significantly affects your credit score, but with time and responsible financial behaviour, it can improve.
Finding a new home:
- Housing options: Explore different housing options such as renting, shared housing, or applying for social housing. It is important to find a home that is affordable and meets your needs.
- Renting after repossession: While it may be more challenging to rent after a repossession due to a lower credit score, some landlords may be understanding of your situation. Be prepared to explain your circumstances and provide references proving you are a reliable person.
Support networks and resources:
- Support groups: Joining support groups of individuals who have gone through repossession can provide a sense of community and shared experiences.
- Professional counselling: Consider engaging in professional counselling to work through the emotional aspects of repossession.
Educational resources: Utilise available educational resources online or through local community centres to learn more about financial management and homeownership.
Home repossession is a daunting reality. The journey from the first missed mortgage payment to court hearings and possible eviction is laden with legal intricacies. This guide has aimed to simplify the steps involved in order to stop repossession. This looked at the legal framework underpinning it, and the various options available should you find yourself in this challenging scenario.
By understanding the repossession process, knowing your rights, and exploring all available options, you stand a much better chance of navigating through the storm and emerging with your financial and personal well-being intact.
We have produced the following glossary to help explain some of the more technical jargon associated with our ultimate guide.
Below is a list of key terms related to stopping a house repossession. If you find yourself confused about the meaning of a word, check this to find out.
Adjournment: A temporary postponement of the proceedings of a case, often due to the need for more information before a decision can be made.
Arrears: Unpaid, overdue debts or bills. In the context of mortgages, it refers to missed mortgage payments.
Auction Sales: A method of selling property by public auction, often used to sell properties quickly.
Bailiffs: Officers appointed by a court to carry out various tasks including the eviction of individuals from a property.
Bidding War: A situation where two or more buyers are actively competing to purchase a property by increasing their offers.
Claim Form (N5): A legal document used to initiate a possession claim in court, specifying the property in question and the basis for the claim.
County Court Bailiffs: Enforcement agents employed by the County Court to carry out evictions and other enforcement actions.
Credit Score: A number based on a level analysis of a person’s credit files, to represent the creditworthiness of an individual.
Default Notice: A formal communication sent by a lender to a borrower who has missed a payment, outlining the missed payment and the action required to rectify the situation.
Debt Management Plan: A structured payment plan set up to help an individual repay their debts in manageable amounts over time.
Defence Form (N11M): A legal document where the borrower can provide their defence against a possession claim, explaining any disputes with the lender’s claim and detailing their financial situation.
Estate Agent: A professional who represents sellers or buyers of property.
Eviction: The lawful expulsion of an occupant from a property.
Financial Ombudsman Service: A service that helps resolve disputes between consumers and financial service providers.
High Court Enforcement Officers (HCEOs): Officers who operate in England and Wales to enforce judgments of the High Court.
Home Repossession: The process where a lender takes ownership of a property due to the borrower’s failure to meet mortgage repayment terms.
Legal Liaison: The act of liaising with legal representatives to ensure that all paperwork is accurate and complete during a property transaction.
Market Conditions: The current state of the market can be influenced by a range of factors including supply and demand, economic conditions, and regional property trends.
Mortgage: A loan secured by the collateral of specified real estate property, that the borrower is obliged to pay back with a predetermined set of payments.
Mortgage Shortfall: The remaining amount owed to a mortgage lender after the property has been sold and the proceeds have been applied towards the mortgage debt.
Negative Equity: A situation where the value of an asset, particularly a house, is less than the outstanding mortgage on it.
Outright Order: A court order that immediately transfers the possession of a property to the lender.
Particulars of Claim Form (N120): A legal document detailing the mortgage agreement, the amount repaid, the amount owed, and the details of the missed payments.
Possession Hearing: A court hearing where a judge evaluates the evidence and arguments presented by the lender and the borrower regarding the repossession of a property.
Quick House Buying Companies: Companies that offer to buy your home quickly, often at a discount to its market value in order to stop repossession.
Repayment Plan: An arrangement made to repay missed payments over some time.
Repossession: The act of taking back property by a lender due to non-payment of debt secured against that property.
Repossession Process: The legal process carried out by lenders to reclaim property when the borrower defaults on mortgage payments.
Seller’s Market: A market condition characterised by a shortage of goods available for sale, resulting in pricing power for the seller.
Short Sale: A sale of property in which the net proceeds from selling the property will fall short of the debts secured by liens against the property.
Support for Mortgage Interest (SMI): A UK government initiative to assist homeowners with their mortgage interest payments.
Suspended Order: A court order that allows the homeowner to stop possession of their property provided they adhere to specified repayment terms set by the court.
Time Order: A court order that alters the terms of a mortgage to make it more manageable for the borrower, typically by extending the term or reducing the interest rate.
Traditional Auction: A method of selling property through a live, in-person auction event.
Viewings: Scheduled events where potential buyers can view a property that is for sale.
Warrant of Possession: A legal document issued by a court that authorises the eviction of an individual from a property.