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Options To Avoid Repossession Of Your Home
Whilst owning a home is a fantastic achievement, if you are unable to continue paying the monthly mortgage fees you could end up facing the prospect of your lender repossessing your home. In this article, we will look at the best ways to avoid repossession of your home should you find yourself in such a position.
What is Repossession?
When you borrow money from a lender to purchase a home, you are doing so with the understanding that you will pay the amount borrowed back to the lender over a specified length of time in monthly instalments. If these monthly fees are not paid for a significant period of time, then the lender will take ownership of the property and the entire capital that you invested, including your deposit1. This is to protect the lender from bad investments.
How does repossession work?
There are many steps a lender must take before repossession occurs, including helping you to change the way you pay your mortgage2, provide you with a reasonable amount of time to make funds available2, and give you a minimum of 15 days’ notice before they initiate any court action2. All lenders much act within the letter of the law, and they do not have the right to repossess your home without a court appointed judge allowing them2.
So, how do I avoid repossession?
To avoid repossession there are several avenues to explore that could help prevent the repossession process:
- You could extend you mortgage term to lower monthly repayments. Today, you can extend your mortgage term up to a maximum of 35 years, lowering the contribution you make each month, but most likely increasing the amount that you will pay overall3.
- You could change from a purchase, to an interest only mortgage which would substantially lower the cost3.
- You are entitled to take a mortgage holiday for up to three months at any point if you are unable to afford the payments4.
- You could arrange to lower payments temporarily if you know any issues are fleeting3.
Can I stop repossession entirely?
If you have exhausted the above options and your lender is considering taking legal action, there are several last-stop options available to you to prevent losing your home.
Often in life, developments occur that can catch you blindsided financially – and as many people in the UK are living from paycheque to paycheque, even a small unexpected payment can be a catastrophe.
If you are facing repossession, the government may be able to provide you with financial aid temporarily until you get back on your feet5. This is especially true if the reason you are unable to cover mortgage payments was not your fault, for example, you were injured and could not longer perform your job role; or if you were made redundant by a company that went bankrupt.
You can also check your insurance policy document to see whether or not your cover includes an inability to pay your mortgage for a set length of time3. The length of time that they are willing to cover your costs will depend entirely on the agreed terms and conditions, but as many these types of policy are becoming increasingly common, this should be your first port of call.
Another way you can avoid having your home repossessed is by renting it out6. Rent generally costs more than a mortgage each month, so if you are able to find fixed term tenants to move in, you can rest assured that your mortgage premium is being covered, with a little extra to put towards your arrears (if necessary).
Can I sell my home to avoid repossession?
The greatest obstacle to purchasing a home is finding the money to put towards your initial deposit. If your home is repossessed, you will lose this deposit and it may take years to re-save enough for another house purchase.
While you can choose to have your home voluntarily repossessed which will allow the lender to offer more favourable terms6, you will always make more of a profit if you are able to sell it in a short space of time. So, how can you sell your house quickly?
- Find an estate agent, explain your issues and give expressed consent for the agent to offer a low asking price in exchange for a quick sale from a buyer.
- Place your home for sale via an auction for a single day sale. It is worth mentioning, however, that regardless of whether your house sells or not, you will still be liable for the auctioneer’s fees. Also, while auctions tend to be a great place to sell quirky, unusual homes, standard homes tend to fare less well.
- You could search for a buyer yourself and engage in a private sale. While this is the mort difficult option due to the amount of work required, it will by far offer you the most profit from a sale.
- You could contact a house-buying company who will buy your home for cash. There are many house-buying companies in the UK at the moment, all of whom are willing to purchase any home for cash – regardless of situation or location. While the amount offered by these companies tends to be slightly lower than market value, it would provide a much high return that a repossession. The other benefit of house-buying companies is that the entire sale process from first contact to completion can take place in as little as two weeks.
Of course, the best way to avoid repossession is by prioritising the monthly mortgage fee before anything else7. They are typically the cheapest way to live, and much more cost-effective than rental fees, and will continue to make you money with house price rises as you further your stake in the total ownership.
Are you worried that your house is at risk of repossession? Why not ask National Homebuyers for advice, as we buy any house. Call 08000 443 911 or request a call back to find out how much you could get for your property before it’s too late.
References:
1 Anon. (2020). House repossession. What to do to avoid losing your home. Available: https://www.stepchange.org/debt-info/debt-collection/house-repossession.aspx. Last accessed 25th May 2020.
2 Anon. (2020). What happens when your mortgage lender takes you to court? Available: https://www.citizensadvice.org.uk/debt-and-money/mortgage-problems/what-happens-when-your-mortgage-lender-takes-you-to-court/. Last accessed 25th May 2020.
