What happens when your home is repossessed?

A brown envelope with Eviction Notice in red capital letters

There are steps you can take to avoid repossession - Credit: Getty Images/iStockphoto

If you are struggling to keep up with your mortgage payments and have been in arrears for some time, your property may be viable for repossession which involves the lender ceasing ownership of the property and selling it on the open market to recover their losses.

With mortgages being a big purchase, it is common for households to only own 10% or 20% of it when they first buy it - and the mortgage lender therefore owns most of the property and has a ‘claim’ until the mortgage is paid off.

If you are very behind on your repayments, the mortgage lender can state this claim and go through the proceedings to repossess your property, which requires you to vacate the premises and regrettably lose any equity that you have in your home. 

Below, we explain the repossession process and some of the key things to consider in this scenario.

What is The Repossession Process?

Repossession is usually a last resort for a lender, because there is a lot of time and effort involved with following up the customer in arrears, having to cease the property, resell it and what price they might get for it.

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If you are behind on your payments, the mortgage provider will not vaguely start with the repossession process, but rather emails, phone calls and letters to kindly follow up on repayment. 

Whilst you are entitled to the occasional mortgage holiday and being in arrears for a few months is not uncommon, this starts to become an issue for the lender if they do not hear back or have not received payment in several months.

At this point, the lender will write to you and initiate court proceedings which will result in a potential court date to discuss your case and plans for repayment or repossession.

Importantly, a mortgage lender or bank cannot show up at your property and just repossess it. Only the court can conclude whether your home will be repossessed and you will be given clear written instructions when to vacate your home, with 14 days notice to leave.

If approved by the court, the repossession of your home can take around 6 to 8 months but this could be faster depending on the bank’s financial position and the state of the economy. Equally, a busy court or huge backlog of cases from the lender could see the case being extended for several more months or years.

Why Might Your House Get Repossessed?

Your home will most likely be repossessed due to a long period of missed repayments and where it appears that future payments are unlikely.

You may be unable to pay your mortgage due to:

  • Bankruptcy 
  • Bereavement
  • Divorce
  • Illness 
  • Loss of income

Your home may also be repossessed by order of the council, for a number of reasons.

How Can I Stop My Home Being Repossessed? 

The key thing to stop your home from being repossessed is to communicate with the lender and work on making your monthly repayments. Mortgage providers can be flexible and you can enter into an ‘arrangement to pay’ which involves paying off smaller amounts each month. 

You can look carefully at how you budget your finances, putting money aside each month for payment. You could also consider remortgaging to try to access better rates or using mortgage holidays to try get your finances back on track.

If the lender is giving you pressure and speaking about repossession, you can send them a ‘holding letter’ which explains your financial position and full intention to make your repayments - and this should buy you some sensible time.

What The Experts Say:

“Repossession of your family home is definitely a last resort, both for you and for the lender too,” explains financial expert, David Beard.

“With secured loans, you can borrow large amounts, but fail to keep up repayments for a long period and you could find yourself facing repossession.” Find out more about secured loans here.

“It is always important to consider your options, speak to the lender and speak to debt professionals such as Citizens Advice or Stepchange to discuss what options are available to you.”

“If your mortgage is too expensive to keep up, you can consider selling it, but you must act with caution. There are costs involved with selling such as agency fees and you will need to sell at a good price to cover your debt. Any debt remaining and you will still be required to pay this off, well after the property has been sold.”

If you are interested in a new mortgage or remortgage, you can check your eligibility with Lending Expert. To speak to an advisor, call 0161 820 8099.