Tips on avoiding home repossession

Being at risk of having your property can be terrifying and can be very lonely. You are worried about what will happen if you lose your home and perhaps embarrassed about what people will think. The reality is you should not be embarrassed – tens of thousands of people are repossessed each year and as the recession bites harder they are on the increase.

You may feel overwhelmed by the situation, but the worst thing you can do is nothing. The lender will not give up pursuing you until either it is paid, or you reach an agreement or it has taken possession of the property. Here are a few tips as to what you can do when faced with repossession.

Speak to Your Lender

Your lender does not want to repossess your home. From a business point of view, it would be much more beneficial if you were to continue paying your mortgage to the end of the term as it would continue to make profit from interest payments. Also, if it has to sell it risks not recovering the full amount of the debt from the sale. It can still pursue you for any shortfall bit unless you still have other valuable assets or a large amount of disposable income (and if this was the case why would you be falling behind on your payments in the first place?) then it may end up having to write of significant losses.

With this in mind, speak to your lender as soon as you get into trouble. Be completely honest and upfront about your situation. Ask if there is anything the lender can do to help. This might be in the form of help with financial planning, a payment holiday or some other arrangement.

You may find that the lender tries to pressure you into agreeing an arrangement that you cannot really fulfil. You must resist this and only agree to make payments you can actually afford. Do not say what you think the lender wants to hear just to get them off the phone as this will only make it more difficult to get the lender to agree to something you can manage in future.

Second Mortgages and Secured Loans

As well as the lender with whom you have your main mortgage, you may have other debts secured on your property such as second mortgage or secured loan. These lenders have the same rights to repossess your property as your main mortgage lender and will also need to be involved in the process.

If you are not sure whether any other debts are secured on your property contact the Land Registry and request an “Official Copy of Register Entries” for your property. There is a fee payable of (currently) £4. The Charges Register lists all of the secured debts.

Get an indication of what your house might be worth. Websites such as Zoopla are useful for this and are free. Find out how much you owe your main lender and work whether your property is worth enough to repay your main mortgage. This is important because if a second lender wants to repossess and sell it will need to repay all of the money owed to any superior lender. If there will not be enough money from the sale to do this then whilst there may still be advantages to them repossessing, it will be a less attractive option.

Prepare a Debt Plan

Although you may think you’d rather not know, it is important that you are aware of exactly what situation you are in financially.

To find out; add up all of your incomings, then add up all of your outgoings not including your mortgage payments. Go through your outgoings and see if there is anything you could realistically reduce or cut out altogether. Subtract your outgoings from your incomings and what is left is what you can afford to pay on your mortgage.

Whilst it’s important understand that you will probably have to do without “luxuries” such as satellite/cable television, brand name food items, expensive clothes and a large car with high road tax and fuel consumption, you should avoid being too ruthless. You need to allow a little breathing room to save some money each month for when things go wrong. For example suppose your car breaks down; will you still be able to get to work? If not you can’t earn money and can’t pay your mortgage.

Ask Your Lender about an Interest Only Mortgage

Most residential mortgages are on a repayment basis. This means that part of each monthly payment you make goes toward paying off the original debt so that at the end of the term you have paid the debt in full.

With an interest only mortgage, you do not pay off any of the original debt. This means that the payments are lower, often quite significantly. It also means of course that at the end of the term you will still owe the money you originally borrowed and at that point the lender will expect payment in full. Nonetheless it can be a useful temporary measure. Even if you have to continue with an interest only mortgage until the end of the term, you property will hopefully have increased in value enough to allow you to sell it and repay the debt secured against it.

Lenders will often be willing to allow you to switch to interest only as an effective way of avoiding having to repossess and you should discuss this at an early stage before you allow your arrears to become too high.

Ask About Payment Holidays and Temporary Reductions

If you are experiencing temporary financial difficulties then your lender may be prepared to allow you to temporarily reduce your payments or even take a payment holiday. This might be enough to get you through a difficult period. You should however only suggest this if it is realistic and likely that your financial situation will improve by a given date.

Look Into the Possibility of Remortgaging

If you have equity in your property you may be able to remortgage, either to increase the term and so reduce the payments or to consolidate some other debts and so lower your outgoings. Even if you have no equity you may be able to get a better rate of interest or extend your term.

When contacting any potential lender you should full disclose your financial situation at the outset otherwise you may waste time going though the initial stages of the process only to be told you don’t meet the criteria once credit checks are carried out.

Selling and Assisted Sales

Unless you know you are in negative equity, get a valuation of your property and assess whether you can actually sell and get enough to pay off all of the debt secured on it. Even if you are in negative equity your lender might be prepared to assist you with a sale. They may write off some debt or convert it to an unsecured debt in order to avoid having to go through the expense of repossession proceedings.

They may contact other secured creditors and come to arrangements with them that will allow a sale to proceed.

Attend Any Court Proceedings About the Repossession

If you have a plan which you think is reasonable then, even if your lender will not accept it, the courts may. In order to evict you the lender will first need to obtain a warrant for eviction and before a warrant can be obtained it will need to get a possession order from the Court. If you are in arrears and if you don’t attend the hearing then it is likely the Court will have no choice but to grant the possession order, however if you do attend and if you present the Court with your plans for dealing with the arrears ten they may refuse the possession order or grant a suspended order which will only be enforceable should you breach your proposed arrangement.

If your are Repossessed, work with your Lender

Unfortunately, it will sometimes be the case that repossession cannot be avoided. If this is the case, whatever your feelings toward the lender, working them will ultimately be in your interests. Consider voluntarily giving up possession to the lender. This can save money and help keep down your total debt, which you will still be responsible for.

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2 Responses to “Tips on avoiding home repossession”

  1. Very Sensible advice here, as you say, the first thing to do is speak to your lender. Most (‘reputable’) companies will want to help.

  2. BMV Properties, what is the real deal?

    There are ways to save money and one of them is “not to lose due to greed”.

    Now a days there are various companies offering you to take advantage of recession and provide you with “below market value / BMV properties”, google bmv properties.
    Most companies have free or reasonable membership fee (below £100) should you decide to become their member but some are over the top!!

    Over the TOP would ask you for 2 levels of membership, to get Auction listings you pay £250 and to be their so called “retained client” you pay £1800, yes £1800!!

    You will be made aware of lots of below market value property deals which can earn you or save you money and the aim is to get you on board as a client with positive feedback from (internet) clients you do not know or have any reference of. When you are up for the membership, you will be asked to provide your account or credit or, debit card details. Now be very careful here, sales people will be very fast, enthusiastic and quick enough to want you to confirm or “activate the membership” over the phone the moment you’ve given your financial details.

    Remember, once you have paid the “membership” money and activated your account you can never ever claim it back, “better think it’s lost” or stolen if you can live with that 🙂

    What are the real benefits in becoming a paid member, none!, Why?

    1. Auction properties: You can get them for free from any auction site, it’s simply free.
    Call the auctioneers and they will be happy to provide you with the list via email or mail they have to sell their stuff to you and make commission, don’t they.

    2. Some will tempt you as their retained client:- If by any chance you decided to become their retained client (where you are promised the listing of property 1st) by parting with £1800, you will be asked to “commit” to the property you have never seen in your life so that can be taken off the market.

    The moment you said yes, you are obliged to pay them their 2.5% commission upfront + any deposit required to secure the property (normally 10 percent).

    Now who in their right minds would agree to even commit to buy a property not viewed and give the fees upfront, which again cannot be “claimed back” !!

    What if the property you bought has major repair works OR

    Annoying neighbours, you might need some kind of insurance to protect you for few BMV deals. This could be the reason it was sold at less value in the first place.

    Leasehold flats in London unless in high profile areas of Kensington etc are very hard to sell if lease is below 80 years so beware on that too, properties are normally 15-20 percent cheaper already because of this.

    So few rules to remember when you are dealing with any company who asks you for membership fees and their commission or any form of payment upfront without the facility of viewing.

    Stay away from companies who asks for fees to be their client.

    Do not commit to anything over the phone!! In some and you can lose all your money paid!
    Only ask for written invoice and then decide should you get tempted for this money loosing “adventure”. Companies have “cooling off” period but if the invoice you receive is later then “cooling off” period?

    Do not give your account details over the phone, once gone, they are out of your hand.

    Do not pay upfront anything. If they want you as a client they can show you the property and give you a timeframe of 24 hrs to decide to put offer.

    Do not commit to or pay their fees upfront to BUY the property, only on exchange of contracts as that might never happen if the vendor decided to back out!

    All the above points are only for you to be safe and how to save money in current climate and put it to better use.

    You can search about some companies by googling their name and on sites like: moneysavingexpert and singingpig and newspaper site guardian, observer and property-system.

    Take care

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