Overcome the threat of repossession

Posted on: 25 November 2009 by Mark O'haire

How to ensure your home is not taken from you.

There can be few things more daunting than the prospect of having your home repossessed.

While, thankfully, the Council of Mortgage Lenders (CML) has cut its forecast for the number of people likely to lose their homes this year, the number still stands at a worryingly high 48,000.

So, what should you do if you are one of them?

Struggling to pay mortgage?

Carry out a full household budget, as this will show what you are actually spending and help you spot any areas where you can make reductions.

Make sure you are not paying unsecured creditors such as bank loans and credit cards instead of the mortgage.

You now may be able to pay your mortgage. If not, you at least will know what your income shortfall is and be able to look at ways of maximising it, such as taking on extra work or taking in a lodger.

If you are about to miss a payment, contact your lender and explain the situation. There are different ways the lender can help you, such as agreeing a reduced payment or switching to interest only mortgage as a temporary measure.

Lenders are more willing to consider proposals if you are honest with them about your situation.

Get help

Two government schemes have been introduced this year to help people struggling with their mortgages, so check if you are eligible for either.

The Mortgage Rescue Scheme provides a package of measures designed to prevent vulnerable families losing their homes.

This works in two ways: shared equity, where a registered social landlord (RSL) provides an equity loan enabling the householders' mortgage repayments to be reduced, and government mortgage to rent, where an RSL purchases the property and the applicant pays rent to the RSL at a level they can afford.

The second plan, Homeowners Mortgage Support Scheme, is available to help homeowners who suffer a temporary income shock. It means that eligible homeowners may be able to make smaller mortgage repayments for up to two years, without the risk of losing their homes.

Arrears

If you are in arrears, you should contact your lender and reach a realistic and affordable agreement to pay extra each month to cover the outstanding arrears over a set period of time.

It is a good idea to prepare a budget of income and expenditure which you can show your lender so he understands what you can afford to pay.

Or, if you are expecting a bonus or lump sum, your lender may be willing to accept full payment of the arrears when that money becomes available.

Repossession

If lenders request a repossession hearing, they are asking the court to allow them to take possession of your house so they can sell it.

This doesn't necessarily mean that you will lose your house.

If you can show the judge that you can afford the mortgage payment and an amount to clear the arrears then they will grant the possession order but suspend it as long as you make the agreed payments, know as a suspended possession order (SPO).

Again, it helps if you can make a budget to show the judge what you can afford to pay.

You will need to keep up the agreed payments or else the lender will be able to apply to take your house and evict you without another court hearing.

If a change of circumstance means that you will not be able to make the agreed payments, you can apply for another hearing, up to the eviction date, to put forward your case.

If the judge considers your reasons to be valid and you can show that a new arrangement can be maintained, the judge can grant another SPO.

Get advice

Dealing with debt is incredibly stressful and even more so when you are facing the possibility of losing your home.

Whatever stage you are at, whether you are about to go into arrears for the first time or if you have a possession hearing pending, contact a debt charity like the Consumer Credit Counselling Service (0800 138 1111) for free advice and support.

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