No one likes to hear the words “home repossession”, or think about what they entail, but they become less intimidating when you realise that the process of home repossession is far from quick and easy. Men in suits can't just turn up at your door out of the blue and seize your home. The exchange of property is a long and methodical procedure, but if the prospect of home repossession does loom, here are some tips on how to deal with it.
How difficult is it for someone to repossess my home?
First things first, you need to remember that anyone who wants to repossess your home has to follow a series of steps, which gives you time to rectify the payment problems or make the necessary preparations. Here's what mortgage lenders need to do before they can successfully enact repossession:
• They need to issue a warning: The lender has to contact you to notify you that your mortgage is in arrears (the most common reason for home repossession). They are legally obliged to see home repossession as a last resort, and should be willing to negotiate mortgage repayment options.
• The lender needs to apply to court: The lender will need to get permission from the court to repossess your home. This means an application to the court, followed by a notice summoning you to a hearing, followed by the hearing itself. Then the judge will still need to rule that the lender is entitled to repossession of your home. In many cases they may grant a suspended possession order, which means you get to keep the home so long as you meet certain conditions.
What can you do to prevent home repossession?
• Negotiate: The judge will want to see that the lender did everything possible to avoid home repossession. This works to your advantage, as you can use the warnings issued by the lender as opportunities to initiate discussion with them. If you have a history of making payments on time, now would be the time to bring that up. If you have a legitimate reason for your mortgage being in arrears, now would be the time to bring that up too. It would also help if you could formulate a clear plan of action for repaying your mortgage.
• Don't simply ignore the warnings: It will help your case if you can show the court that you attempted to find a compromise. Keep any evidence of the communication between you and the lender handy.
• Get professional advice: Legal, financial and property advisers will be able to make suggestions as to how you can buy time and acquire the funds needed for mortgage repayment. They can also prepare you for a legal battle, if it comes to that.
• Look into debt relief services: If you're not confident in your ability to pay back what you owe, you could look into mortgage rescue schemes. An example would be this sale and rent back scheme, where a company buys your home at a reduced rate and then rents it back to you.
Home repossession statistics in the UK
Figures from the Council of Mortgage Lenders show that the rate of home repossession has fallen steadily year-on-year, and is currently at its lowest level since 2006. In 2014, 21,000 homes were repossessed. That's 26 per cent lower than the year before.
Cheaper mortgage deals and lower interest rates have helped beleaguered homeowners, but the data also indicates greater willingness on the part of lenders to empathise with their clients. However, there is concern that the rise in interest rates being predicted for the coming year may cause difficulties for homeowners struggling to make their mortgage repayments.
Before you buy a house, make sure you know what you’re in for in the long-term, plan for interest rate hikes and consider what would happen in the event of prolonged illness or even your death.
photo credit: bailout - it's the homeowners in that are in distress via photopin (license)