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What To Do If Your House Is Being Repossessed?

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Property repossession is a difficult and taboo topic for both homeowners and lenders alike. It can be a distressing experience for those who are faced with it, as it often means losing the safety and comfort of your home.

Debt is unfortunately a very common problem, and in the UK it is estimated that after the Christmas season, as many as 1.6 million people fall into debt, usually through credit cards or other bills.

If this debt includes mortgage payments, it can cause a whole range of issues and worries, such as whether you will get any of the money back that you have paid.

It is important to remember that any other debts you may have do not just disappear once your property is repossessed.

In this article, we attempt to answer the question of whether or not you are likely to get any money back from repossession and provide you with more information surrounding this topic.

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Things to Remember

Before getting into the details, there are some important points to consider about property repossession and its process.

If you have taken out a loan or a mortgage for your home and are behind with either of them, lenders have the right to apply to the courts for repossession, as per UK law.

Should your home be repossessed, the proceeds from the sale will be used to pay off the secured loans.

Whatever remains of the mortgage debt will be given to the lenders.

After that, funds will be used to cover legal fees, repossession costs and court fees, with any remaining money being paid to you.

How Does Property Repossession Actually Work?

We all must have the same understanding of how property repossession works before we move forward.

Knowing the procedure of property repossession is important as it will help you comprehend why you may not get your money back after the repossession of your home. This could be the case even if you have some equity in your home.

If you are already in a negative equity situation, you probably understand that you won’t get any money from your home if it is repossessed.

Remember this: Just because you have a mortgage secured on your property does not mean that it is yours. In the UK, securing a mortgage on a property means that the mortgage company legally owns the home.

When you take out a mortgage, you are essentially giving the lender the right to repossess your property if you fail to make payments.

If you miss even one payment, you will be in arrears. The Financial Conduct Authority (FCA) summarizes this as: “Your home may be repossessed if you do not keep up with the repayments on your mortgage.”

In other words, if you do not pay your monthly mortgage bills, the lender can take back your property. It is not easy to get out of a mortgage agreement after it has been signed and the money has been released.

What To Do If Your House Is Being Repossessed
If this debt includes mortgage payments, it can cause a whole range of issues and worries, such as whether you will get any of the money back that you have paid.

My House Is Being Repossessed: What Can I Do?

If your home is in danger of being repossessed, there are a few things you can do to address the issue or give yourself more time before you have to move. But before we look at these, there is one vital thing you must not do.

Don’t: Avoid Taking Action and Put Your Head in the Sand

Panic can set in when you default on a payment. You might try to ignore it and avoid opening urgent envelopes or answering calls.

But this won’t make the situation better; it will only worsen it. Usually, you only have 28 days to pack up and leave your home once a court order for repossession has been issued. If you ignore the situation, your home will be repossessed faster.

Do: Talk to Your Lender

When your house is being taken back by your lender, the best thing you can do is to open up communication with them as soon as possible. Repossession is not something banks and lenders do lightly; it’s usually only done as a last resort.

It can be uncomfortable to find yourself behind on mortgage payments and not able to pay, and the longer you wait, the more you may want to avoid it. But being honest can help you find a solution or stay in your home longer.

You don’t have to wait until you’re in arrears to take this step – even if the lender has already gotten a court order for repossession, you can still talk to them.

You might be able to set up a payment plan that works for both you and the lender. Be aware, though, that if court proceedings have already started, you’ll need to explain your arrangement to the judge.

Do: Work Out a Repayment Plan

After getting in touch with your lender, your next step should be to try and work out a repayment plan. While you may not be able to pay your full monthly instalment, plus any additional payments you have missed, your lender may accept a smaller payment.

This can demonstrate your goodwill and may help to repair the relationship and delay, if not prevent, your home from being repossessed.

By law, your lender must consider any requests you make to alter your payment strategy and any offers of payment you make.

What is a Repayment Plan
You are entitled to sell your home at any time, even if court proceedings have already started, as long as your mortgage lender hasn't physically taken possession of your property.

 Do: Sell Your House

If you are in arrears and the value of your home is enough to cover the costs of your mortgage and arrears, as well as giving you enough to set up somewhere new, it is worth considering selling your home.

You are entitled to sell your home at any time, even if court proceedings have already started, as long as your mortgage lender hasn’t physically taken possession of your property.

However, selling your home can take time, which you may not have if you are behind on your payments and your house is being repossessed.

At Property Saviour, we guarantee an offer on your home no matter its history, location or condition, allowing you to sell your house and be debt-free in as little as seven days.

Going to Court When Your Home Is Being Repossessed

If the process of repossession has started, you may find yourself facing court action. Your lender must provide you with written notification at least 15 days before the commencement of court proceedings.

They must also inform you of the date and time of the repossession hearing, as well as notify your local council within five days of receiving notification from the court, in the event you need to apply for homelessness.

Once your lender has initiated a repossession action, you will receive a defence form from the court, which you must return within 14 days.

This allows you to explain why you think the lender should not repossess your home, and to also detail the efforts you have made to reach an agreement to pay off the arrears.

Therefore, it is very important to contact your lender as soon as possible.

The repossession hearing will take place in the judge’s chambers. Your home will not be repossessed unless the judge grants a repossession order.

The repossession hearing does not necessarily mean you will be evicted from your home, and the judge may make a variety of other decisions, including granting a suspended repossession order.

This will allow you to stay in your home, provided you make regular payments as agreed and stipulated in the order.

Please note: If the court action takes place within the 90 days following 27 March 2020, and your home is currently being repossessed as a result, your lender will not be able to evict you due to the coronavirus.

If you are in the process of having your house repossessed and are considering selling it to clear up the arrears and start afresh, you can do so quickly with the help of the House Buyer Bureau.

What Will Happen if I Miss a Mortgage Payment?

Missing a single mortgage payment can be likened to a ticking time bomb. If ignored, it will eventually lead to repossession of the home. With each missed payment, the clock ticks closer to the lender getting the repossession order from the court.

For them to legally repossess your home, mortgage lenders must follow certain procedures. If you cannot present a workable solution to the court, or if your offer is dismissed, the lender will get a repossession order.

This means that it won’t be long before you have to leave the property.

What Will Happen if I Miss a Mortgage Payment
This worst-case scenario may very well happen, so it's important to act fast. A ticking time bomb, if you will.

What Will Happen After my House has Been Repossessed?

So, that’s a basic overview of how property repossession comes about and the rules mortgage lenders must follow before moving forward with the order.

Now, what happens after your property is repossessed? We’re here today to find out if it’s possible to get money back after the order is put in place.

  1. Once the repossession is complete, your mortgage lender will review the numbers or “do the maths”. They will calculate how much the property has earned after being sold.
  2. Then, they’ll add up the total amount remaining on the mortgage, including all arrears and penalties. After that, the mortgage company will add up all of the legal expenses they’ve had to pay to go to court and any legal fees.
  3. If there’s any money left after this, it will be paid to you. However, if the total amount of all these sums result in you owing money to the mortgage company, they can come after you for it. This is when they may decide to “bankrupt” you. This could lead to you losing other assets you own.

It’s essential to answer and keep in touch with your lender once you start having difficulty making payments. The more time passes without taking action, the worse the situation will become.

This worst-case scenario may very well happen, so it’s important to act fast. A ticking time bomb, if you will.

If my House is Repossessed, Will I Get any Money Back at all?

You may be wondering if you will get any money back after your home has been repossessed. The answer depends on your situation, including how much you owe on your mortgage, if you have negative equity, and the costs of legal fees, court orders, etc.

Even if you think you have equity in your house, there is still a chance that you will not receive any money after repossession. Here are the two main reasons why you might not get money back, regardless of equity.

Your Lender has Sold the Repossessed Property at Below the Market Value

Unfortunately, it is common that repossessed property is hard to sell unless it is priced lower than the usual market value.

  • This is the primary reason why you may not receive any money back for your property even if you expected to.
  • Lenders are not in the business of selling property.
  • This implies that they have no interest or experience in selling property for the best market value.
  • All they are interested in is selling the property and recovering their money as soon as possible.
  • For the homeowner, a quick sale usually means a price lower than the market value. Generally, a repossessed house is sold for up to 25% less than the market value.

An example of this can be seen with a house worth £235,000 on the open market. The mortgage amount you owe, including arrears, is £176,000. This leaves an equity of £58,750.

Let’s say the mortgage lender sells the property quickly for 25% less than the market value. This means it would be sold for £176,250.

Adding the selling fees of £2,500, the mortgage company will receive £173,750 after taxes. This is £2,250 less than what was owed on the mortgage. This remaining sum is usually used to cover additional costs. To learn more about what these costs are, keep reading.

What happens if your house is repossessed UK
The extra costs you must factor into the entire pricing are court fees and legal expenses associated with the repossession process.

Court Fees and Legal Costs

The extra costs you must factor into the entire pricing are court fees and legal expenses associated with the repossession process. Your lender will have to pay these fees initially to move forward with court proceedings.

These fees typically amount to more than £1000, so the remaining £2,250 will be increased by these court and legal costs.

This means that even if there is equity in your home, you will likely not receive any money back.

However, if your home is in negative equity or has very little equity, then you won’t get any of your money back, unfortunately. But don’t give up hope! There is a solution that could help you more than you think.

Always Seek Help from a Professional in the Industry

We cannot guarantee that you will be able to prevent your property from being repossessed. However, some solutions may help to make the situation easier.

If you have yet to miss a mortgage payment, it is best to take action as soon as possible. If you do miss a payment, your credit score will be impacted. Therefore, you must contact your mortgage lender as soon as possible.

If you are still unable to make payments, it may be worth looking into legal aid. Additionally, numerous charitable organisations, such as the Civil Legal Service, Citizens Advice, the National Debt Line, and Shelter, are available to provide free advice.

Additionally, your local council may be able to assist with rehousing, should the repossession have already taken place.

It is important to remember that missed payments can happen to anyone for a variety of reasons. Therefore, it is best not to hide or ignore the issue, as it will only worsen with time. Seeking help is always an option, even if the repossession has already occurred.

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