What really happens if you can't keep up your mortgage repayments? A repossession? Let's find out more about this nasty word and what can be done
Repossession law and rights are different across Britain so we will take a look at each of them in the coming days. First we looked at how repossessions happen in Scotland. This is what happens in England.
Your home can be repossessed by your mortgage provider if you fail to keep up with your mortgage repayments and they pursue a path of court action to repossess your home in order to sell it to recover your mortgage debt. In England, this is known as repossession action.
The basic process of home repossession is as follows:
However, the process of repossession is not necessarily a clear cut process as there are many steps which can allow you to negotiate with your mortgage provider and other avenues of help that are available. There are even mortgage rescue schemes available, but be careful to check their terms and conditions.
Even once you have built up mortgage arrears you will always have the option of negotiating with your mortgage provider and you can get free help with this from the Citizens Advice Bureau.
It is possible to prevent court action if you are able to set up an arrangement with your mortgage provider. The good news is that even if this arrangement breaks down there are still other options available which your mortgage provider can pursue without having to repossess your home through a possession order.
Your mortgage lender will only proceed with court action as a very last resort. If you took out your mortgage after 31/10/2004 your mortgage lender will be subject to rules as set out by the Financial Conduct Authority, (FCA). Under these rules they are obliged to treat you fairly and allow for every opportunity for you to pay off your arrears. If they don't you can complain to the financial ombudsman service.
Your mortgage provider will have to notify you in writing if they plan to take court action. You can get specialised advice on these letters by taking them to the citizen's advice bureau who will be able to help you. This action usually happens after an agreement between you and your mortgage lender to pay back your arrears has failed. Mortgage providers should not take court action if an agreement is trying to be met.
Even at this point there is still an opportunity to prevent your home being repossessed if you are able to come to an agreement with your mortgage provider. It's never too late to negotiate with them.
Under pre-action protocol there are a number of circumstances which should prevent your mortgage provider from pursuing court action.
If your mortgage lender continues to pursue court action you will receive from the county court a claim, a possession of the property which details the case against you and what will happen at the court hearing. You will also receive a defence form which can be used to argue your case and should be returned to the county court prior to your hearing.
You will receive 3 to 8 weeks notice of your court hearing and even at this stage you can still try to negotiate with your mortgage lender and could prevent your case going to court by being granted a suspended possession order of your home provided you keep up with paying off your mortgage arrears after successful negotiaitions.
During the court hearing your case will be heard and the final outcomes can range from your case being dismissed without further action, or the case can be suspended if you have made a new arrangement with your mortgage advisor or, as feared, in the worst case scenario your mortgage lender is granted a possession order.
It is highly advised to have legal representation for your court hearing.
If your mortgage lender is granted a possession order of your home a money judgement can be issued at the same time which allows them to recover their loan. This means that once your property is resold and there is a shortfall in the money owed to them you will be responsible for paying the difference. They are also allowed to pass on their recovery costs to you which include court fees and legal expenses.
However you can appeal a possession order and you have 21 days to appeal after a judgement by the court has been made.
It's important to keep up with your mortgage payments, if you have any money left over after paying all your monthly bills it's a good idea to put some into savings in case you run into difficulties paying your mortgage at a later date. If you run into financial difficulties don't wait for your money troubles to spiral out of control. Speak to your mortgage as soon as possible to let them help you keep track of your mortgage payments.