Repossession is a word that might strike fear into the hearts of many, especially those who are particularly fond of their material possessions. It is, however, often a last resort that you should never find yourself falling into as long as you keep on top of your finances. Here, we’ll take you through exactly what repossession means, why it happens and, in kind, how to avoid it!
What is repossession and what does it mean?
Repossession is a legal process in which a lender (generally the bank) takes back ownership of a property because a mortgage, or other loan taken against the property, hasn’t been paid. It’s generally used as a last resort if you, as the owner, cannot continue to fulfil your payment obligations, which will have been drawn up at the start of your loan agreement. Before repossession proceedings begin, it will be up to your mortgage lender to explore all other avenues available to help you repay your loan. If they cannot come to an agreement with you, they are free to begin repossession proceedings. When discussing repossessions it’s important to understand that, whilst when you take out a mortgage, you technically own your home, the mortgage lender will have a financial claim against it until you have paid off the agreed amount. Once the lender has repossessed your home it will almost certainly be sold on in order to recoup their lost costs. Note that only a court can decide is a lender has a legal right to repossess a home and send bailiffs to forcibly evict you. Hopefully, however, if you pay attention to the information that follows, it should never come to that!
Why might my home be repossessed?
Repossession generally occurs as a result of mortgage “arrears,” (owed money) which build up if you don’t or can’t pay off your mortgage at times when your payment is due. This could be down to anything from redundancy, sickness or changes in your mortgage rates. Your home could also be repossessed by either your main or secondary mortgage lender after a bankruptcy order is made against you, if a local council or public body makes a compulsory purchase order on your property, if you can’t pay your ground rent or service charges, or break any of the conditions of your lease.
When a repossession claim is filed, the judge will either decide to delay the hearing, set the case aside, or grant a repossession order. These are the orders granted the lender by the court that give them permission to repossess your home, and they come in a variety of tantalising flavours.
Outright repossession order
Also sometimes referred to as a simple “order for possession,” this is an order that gives the lender the legal right to take back your home within 28 days of the court hearing. If you haven’t left your home after this date, it’s within the lender’s legal rights to ask the court to evict you from the property. You could plead with the court to delay the eviction date to a maximum of 56 days if you are in particularly dire circumstances (if you are ill or are the primary carer of young children, for example). You can also, of course, attempt to negotiate with your lender, even after the order has been issued.
Suspended repossession order
A suspended sentence that can be suspended indefinitely as long as you keep to certain conditions. The conditions that will be outlined in the order could include monthly payments alongside monthly fixed amount to pay off your arrears, a lump sum payable by a certain date and/or a series of extra payments on specified dates. The terms of this order might also give you the opportunity to sell the property in order to pay off your arrears. If you break any of the conditions set out in the order, the lender can ask the court to send bailiffs to evict you.
This refers to an order issued with a set amount the lender expects you to pay in order to remain in your home. If you can’t make these payments the money might be deducted automatically from your bank account or wages, or, in extreme circumstances, bailiffs might be sent to take away the things you own that add up to the value of the money order. A lender can’t use a money order to evict you, but if you can’t make the payments set out in the order on time then the lender could apply for a possession order.
This is a specific amount of money affixed to a possession order that is generally a combination of your arrears, court fees and the legal costs accrued by your lender. If this is not paid, then the lender will ask the court to begin the proceedings outlined in the possession order. A money judgement shouldn’t apply as long as you are able to pay your arrears and the amounts set out in a suspended order, or if the property has been sold for more than the amount of the money judgement.
A time order is generally only agreed upon with a second mortgage or other type of loan secured against your home, and means the judge decides to change the amount you are expected to pay on your loan for a certain period of time. This is basically a grace period to allow you to get up to speed with your payments and can also reduce the interest payable on your loan, delay when your payments are due and increase the term over which the loan can be paid.
Adjournment or Dismissal?
Adjournment or outright dismissal of the lender’s repossession case is possible if you are able to raise a lump sum to pay off your arrears before the case goes to court, if you are selling your property and require more time or if the lender failed to follow correct proceedings, or turn up to court. You can also apply for an adjournment to allow yourself time and the opportunity to raise the funds required by the lenders and to seek professional advice to solve your financial problems.
What are the consequences of having a house repossessed?
If your property has been repossessed it can be very easy to fall into a spiral of despair and lose all hope. There is, however, always something you can do to pull yourself out of the mire. That’s not to say that it’s not going to seriously impact on your immediate future though. The most immediately obvious downside (besides the fact you’re losing your home) is that it will be very difficult for you to get a new mortgage or take out any loans at all. There are, however, a number of governmental initiatives in place set up to keep people in their homes, and many lenders will not actually begin legal proceedings to repossess your home immediately. They will generally give you a period of time to arrive at an alternative solution, which can be as long as 6 to 9 months depending on your lender. In far as government benefits are concerned, if you have been made redundant recently it won’t necessarily lead to automatic repossession. There are initiatives in place that will help you pay off some or all of your mortgage interest in the case of redundancy, though we’d still recommend having some ‘rainy day’ savings set aside, as these often take time to kick in. There’s also the possibility of state benefits to fall back on, so remember, there is usually a way to stave off repossession as long as you are willing to do everything in your power!
This is obviously a rather frightening topic to discuss, but it is always necessary to understand the worst case scenario. Hopefully we’ve been able to offer some food for thought. None of us ever want to think the worst, but it’s never a bad idea to keep one eye on the reapers (or in this case the bailiffs) and keep them at bay!