How to Stop Repossession
There is much that borrowers can do to stop repossession. The most important thing is to take action as soon as it becomes clear that there are going to be problems maintaining payments. As soon as payments are missed this will start showing up on credit reports, limiting the options available.
Choosing a Mortgage
The first step to avoiding repossession is to make sure that the mortgage is affordable. Before signing a mortgage agreement borrowers should:- Prepare a proper budget so that they know exactly what they can afford.
- Not assume that income will increase over the coming years.
- Assume that interest rates will go up.
- Make sure that they have read and understood the terms and conditions of the mortgage or loan they are considering.
Talking to Lenders
Mortgage lenders have a stated responsibility to assist borrowers if they face difficulties with their mortgage. Lenders will often be very accommodating if a borrower is going through real financial problems. Some lenders may even allow a payment holiday – a number of months when a borrower does not have to pay anything. Borrowers should approach their lender as soon as difficulties arise, preferably before payments are missed.Making Payments
If arrears can be kept beneath a certain level (usually two months’ worth of instalments) lenders will generally not pursue a possession order - even once court proceedings have started. If the arrears are lower than the level required when a case comes to court, most lenders will ask for the case to be “adjourned generally with liberty to restore”. This means that the case is effectively put to sleep. The lender is entitled to ask for another hearing if the arrears build up again. This can happen repeatedly but costs will be added to the mortgage debt every time the case is re-listed.Selling the Property
If a borrower cannot afford to maintain payments towards their mortgage there is nothing to stop them selling the property themselves. People are often reluctant to sell their home but this is a better option than having it repossessed and sold by the lender. Many lenders will not start repossession proceedings if they know that the borrower is in the process of selling the property.Once a case comes to court most judges will give borrowers time to sell by granting a possession order for longer than the usual 28 days – a 56-day order is common. Judges may also postpone evictions if satisfied that the borrower is about to sell the property.
Re-mortgaging
The approach of lenders and the courts to borrowers who are re-mortgaging is similar to their approach to borrowers who are selling. Many judges will happily give a borrower more time if they are shown evidence – such as a mortgage offer - that the borrower is in the process of re-mortgaging.Opening a newspaper or doing a search on the internet will reveal that there are now many companies offering to provide re-mortgages to people who are already in arrears. Naturally these companies will charge a higher interest rate than other lenders. In the current economic climate it is likely that first-time buyers and people with bad credit ratings will find it increasingly difficult to get mortgages.