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How to avoid repossession of your home

Written By:
Myles Robinson - Expert Finance Advisor

Posted: Feb 8, 2023

How to avoid repossession of your home

Losing your home to repossession can be devastating as it damages your credit, making it difficult to get a mortgage. You also lose your stake in the house. Usually, repossession is a legal process whereby the lender moves to court to seek a repossession order if you have defaulted on your mortgage repayments and do not agree on a repayment plan.

However, you can stop the house repossession process any time before the eviction and this article will discuss your options for avoiding an eviction.

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What Is the Legal Procedure for the Repossession of Your Home?

The lender has to follow a stipulated legal procedure to repossess your house. First, you must default on several mortgage payments. The lender should contact you to follow up on the missing monthly payments and inform you of the total amount owed.

You can request to change the method of mortgage payments. The mortgage lenders must review your request and respond to your mortgage payment offers. If they decline, they should explain their reason within ten days.

The lender then has to give you 15 days’ written warning before proceeding to take court action. Once they have filed the case in court, they should inform you of the court repossession hearing date, time, and venue. Once you receive the court hearing notice, you should alert the council that you may need emergency housing or apply for legal homelessness in the near future.

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Ways to Avoid a Repossession

1. Negotiate With Your Lender

Usually, one defaulted payment is not enough for the house to be repossessed. It takes at least three missed payments for your lender to move to the court to seek a repossession order. The court process can take up to six months to start and longer for a judgment to be made.

You can negotiate with your lender at any one point before the eviction for an adjustment in your repayment plan.  Adjustment options include payment holidays, lengthening the mortgage term, and temporary switching to interest-only payments.

However, the earlier you start the negotiations, the higher your chances of getting a leeway. It is best if you can reach an agreement out of court as. Therefore, before court proceedings start contact your lender as soon as you notice a change in your financial situation to save any legal costs.

2. Improve Your Finance Management

If the lender declines to adjust your repayment plan, assess if there are ways you can improve your finances to keep up with your mortgage debt repayments. Start by tracking your spending to identify non-essential expenditures you can do away with. For example, dining out, entertainment, and subscriptions that you no longer use.

Come up with a budget that allows you to increase your savings. In the meantime, avoid making large purchases and direct any lump sum amounts towards your mortgage payments. If possible, get another job to increase your cash flow.

3. Seek Financial Aid

Various government programs could help you with your mortgage payments. These include the Mortgage Rescue Scheme, Support for Mortgage Interest, and other benefits that could boost your income.

The Mortgage Rescue Scheme is available in Wales and Scotland but not England. In Wales, the rescue scheme is operated by local authorities and housing associations to help homeowners who would become homeless to avoid repossession. The Scottish government has a Homeowner’s Support Fund to help struggling homeowners avoid losing their homes.

The fund operates two schemes that you can apply for. The first is the Mortgage to Rent scheme, whereby a social landlord buys your home and then rents it back to you. The second is the Mortgage to Shared Equity Scheme, whereby the Scottish government buys a 30% stake in your home, reducing the amount owed to the lender. Therefore, you can continue to live in your home and make mortgage repayments.

The Support for Mortgage Interest (SMI) is a repayable loan that goes towards interest payment on your mortgage or loans taken out for home improvement and repairs. You are required to repay the loan at an interest when you sell or transfer the ownership of your house. You can also opt to make voluntary repayments. Note that you cannot use the loan for the principal amount or mortgage arrears.

The SMI takes different forms, including income-related employment and support allowance, universal credit, pension credit, and income-based jobseeker’s allowance. Eligibility criteria depend on the type of loan. You can qualify for up to 200,000 pounds. However, the maximum amount is capped at 100,000 pounds if you get the loan in the form of pension credit.

4. Sell the House

If you can’t find a way to keep up with your mortgage repayments, you can sell the house before property repossession. The sale process is more complicated than selling a home not facing repossession, but it can be done. The sooner you start the sale process, the better, as you will have more time to find a buyer and close the sale.

There are two main options for selling a house before a repossession—by yourself or through a real estate agent. Selling through a real estate agent can be pretty costly as you incur valuation fees, legal fees, real estate agent commissions, and staging fees. The traditional sale process will take longer, and you might not have that time.

Alternatively, a quick sale process to cash property buyers may be ideal. You do not need a real estate agent for it, which entails minimal paperwork. Simply contact a reputable cash buyer near you. They will assess the house and make a cash offer. Although their offer is usually lower than the house’s market value, if it is sensible enough to pay for the mortgage arrears, then go ahead. Besides, you save on related real estate costs.

The main downside of selling the house before a property repossession is that you may not get assistance from the government if you are homeless. Also, you will not be able to claim any benefits if you receive more than 16,000 pounds from the proceeds of the sale after paying off the mortgage.

Another downside is that the sale proceeds may not fully cover the mortgage arrears. If your house has negative equity, the proceeds from the sale will be much lower than the mortgage arrears, and you will be at a shortfall. The lender has the right to claim the remaining amount for up to twelve years. A shortfall reflects negatively on your credit report and may make it difficult to access any other loan or mortgage.

To avoid this scenario, consider an assisted voluntary sale where you involve the lender in selling the home. The lender can support you in various ways throughout the sale process. For instance, they can give you three to 12 months to sell the house and agree to reduce or suspend the mortgage payments throughout the sale process, pause a repossession action if they have already initiated one, pay our conveyancing fees, or provide a deposit for renting once the house is on sale.

Different lenders have different criteria for supporting you in an assisted voluntary sale. Some have formal schemes while others do not. Nevertheless, they should help you in one way or another. If your lender declines your request for an assisted voluntary sale, complain to the Financial Ombudsman Service (FOS).

Should the lender move forward with the repossession claim, ensure to attend all court hearings. Provide the court proof that the house is on sale and request an adjournment to allow you to close the sale process. The court may decide to move forward with the possession order if you do not have a buyer or move the judgment to a later date.

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5. Fill out the Mortgage Defense Form

When a mortgage lender starts a repossession against you, the court sends you a blank defence form to fill out, along with detailed notes on how to fill it.  The court will also send you copies of the filled claim forms filed by your mortgage lender, hearing venue, date, time, and contact details of the court.

The defence form is an opportunity for you to explain to the court why the lender should not repossess your home. You must fill and return the form to the court within 14 days.

6. Argue Your Case in Court

Typically, a house repossession hearing takes place in the judge’s chambers, but the same protocol is observed as it is in the court. You will have an opportunity to defend yourself and prevent repossession. Present to the court any proof of improved financial status or ability to pay your mortgage balance, including pay slips, bank statements, job offers, correspondence letters for benefits you may be entitled to, and an estate agent letter. The judge can adjourn the hearing, set aside the case, or grant a house repossession.

7. Suspend the Warrant of Possession

If your financial status improves before the set eviction date, you can ask the judge to suspend your warrant of possession. To apply for suspension, fill out an application notice and send it or hand-deliver it to the court that heard your case. Inform the court that you need a hearing on short notice before the eviction date. You will be required to pay a court fee for the hearing. If suspended, you would be allowed to stay in the house for longer as long as you keep up with your mortgage payments.

8. Appeal Court Judgment 

You can appeal the judgment if you feel they did not judge your case rightfully. A more senior judge will hear your case. At the end of the original hearing, seek permission from the judge for an appeal. If they decline, seek permission from a more senior judge. Once you get permission, apply for the appeal immediately. You will be required to pay a court fee. The new judge may uphold the original ruling, dismiss it, or order a new court ruling.

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Seek Expert Help to Avoid a Repossession

Getting a repossession notice from your lender can leave you feeling defeated and not knowing what to do. However, all is not lost. With the right assistance, you may be able to stop or postpone your house repossession. Talk to a professional who understands repossession laws. For instance, you can get free advice from your local council, shelter, National debt line, or Citizen advice office. Civil Legal Advice or a mortgage specialist can also provide legal advice.

On the court day, you can get legal advice from the Housing Possession Court Duty Scheme (HCPDS). HCPDS operates in county courts across England and Wales. They provide a specialist adviser on the day of the hearing who can represent you or guide you on how to represent yourself. They can also help you to negotiate a repayment arrangement with your mortgage lender.



Can a house repossession be reversed?

The only way to reverse a repossession is through an appeal of the judgment. You could appeal the judgment if you feel the procedure was unlawful or the ruling was not just. Seek legal advice before appealing the judgment.

What happens if I cannot stop repossession?

The court will issue a repossession order that requires you to leave the property by a given date. In most cases, you have a window of 28 days from the date of the judgment. If you do not leave the house by the given date, the court gives a warrant of possession for bailiffs to evict you.

Contact us now if you need help getting a mortgage after repossession proceedings.

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