In the past year or so, nearly everyone with a mortgage has experienced a hike in their monthly repayments due to the rise in interest rates. Coupled with the cost of living crisis, more and more people are finding it hard to keep up with their monthly outgoings.
It’s a real concern for a lot of people at the moment. And as you start thinking about how to keep up, you might think about the worst case scenario – repossession.
The first thing to say is that no lender wants to repossess your house if they can help it. It’s really a last resort.
And the second thing to say is that the rules have changed recently. In August 2023 the Government, the Financial Conduct Authority (FCA) and mortgage lenders agreed a Mortgage Charter to ease the burden on people struggling with their mortgage repayments, which can be accessed at Mortgage Charter – GOV.UK (www.gov.uk).
There is hope out there!
In this blog, we look at strategies to help you repay your mortgage, even when the monthly repayments have increased, and what to do if you do end up in a repossession situation.
How does the Mortgage Charter help me?
Under the Mortgage Charter, lenders have agreed that:
- You can extend the term of your mortgage to reduce the monthly payments
- You can switch to interest only payments for up to six months
- You can negotiate other support, like a temporary payment deferral
The idea is that the lenders will be supportive to anyone worried about their mortgage repayments. So, you should feel confident that you can speak to your lender, without impacting on your credit file.
It used to be the case that mortgage lenders could begin repossession proceedings if you missed three or more mortgage instalments. But under the Mortgage Charter, lenders give you 12 months’ grace from the point of the first missed payment.
You can find out if your lender has signed up to the Charter on this webpage Mortgage Charter – GOV.UK (www.gov.uk).
If you’re falling behind with your mortgage repayments, the first thing to do is speak to your lender. They’ll give you a highly-trained person to speak to, so that you can find a way forward in your circumstances. It may be a new repayment plan, or a cheaper mortgage product, or one of the options mentioned above.
Navigating the court process
As a very last resort, your lender will start the repossession process, which involves a court process. A lender can only repossess your home if the court grants permission.
It won’t come out of the blue, but at the very least your lender will give you at least 15 days warning, in writing, that they plan to take you to court.
After that, you’ll receive the notice of the hearing, and the claim. With that bundle of information, you’ll find a blank defence form with guidance notes. Your defence is your chance to tell your side of the story and explain why you think the lender should not repossess your home.
You must return your defence within 14 days. If you don’t then the judge may simply decide that the lender can repossess your house.
On the day of the hearing, you’ll attend the judge’s chambers, which is a little less daunting than a court room. Please do attend any hearing you’re invited to. If you don’t, the judge will likely give the mortgage lender the right to evict you.
At the end of the hearing, the judge will make their order, which will be one of three options:
- The lender can repossess your property
You will have to leave the property within 10-14 days
- A suspended possession order
You’ll be allowed to stay in your home, and you’ll put together a repayment plan to clear the debt. If you don’t manage to meet the strict criteria attached to the plan, then your home will be repossessed.
- Adjournment
The judge may decide that they do not have sufficient evidence to make the call, and will postpone the hearing until a later date. The judge will let you know what steps they expect you to take before you come back to court.
You might be able to appeal a decision by a judge, but it’s only in quite limited circumstances. You’ll need to show that the judge made a mistake in fact or in law.
Who is responsible for selling the house?
It’s always best for you to sell your own home if you can. That’s because it can be difficult to get another mortgage if your home was repossessed and sold by the lender. So even if there is a repossession order against you, it’s worth asking your lender for time to sell the house.
You’ll repay your outstanding debt from the proceeds of the sale and keep the remaining amount. Unfortunately, if there’s a shortfall and the proceeds of sale don’t quite cover the outstanding debt, then you’ll still have to pay back what’s remaining.
If it’s not possible to sell your own home, then the lender will take control of the process. If lender sells the house, they will take any outstanding debt from the proceeds and give the rest to you.
Is there any support for legal fees?
It’s often helpful to have a lawyer on board, especially if you end up in a court process. There is financial support out there to help you retain a lawyer.
Since 1 August 2023, the Legal Aid Agency has been running a Housing Loss Prevention Advice Service, which can be found here Legal aid for possession proceedings – GOV.UK (www.gov.uk). If you’re at risk of losing your home, then you can use this service. You do not need to meet the legal aid financial eligibility rules.
If you’d like to check if you qualify for legal aid anyway, you can do it here Check if you can get legal aid – GOV.UK (www.gov.uk). It’s generally available to low-income households. You can also contact your local Citizens Advice Bureau for free advice.
The main sentiment is: don’t suffer in silence. There’s help out there and most lenders are open to discussions and negotiations.