If you haven’t reached an agreement with your lender regarding repaying mortgage arrears and facing repossession hearing with not much knowledge about what to do next, then on the day of hearing you can get free legal advice & representation under the Housing Possession Court Duty Scheme (HPCDS). Under this scheme, a specialist adviser can represent your case in front of the judge as per the process of hearing as well as communicate with your lender so that a feasible repayment plan could be formed. Given the relevance and exigency of this legal advice, the Legal Aid Agency (LAA) that funds this type of advice, has removed the financial eligibility criteria so that anyone in the need of such service can get it without paying any fees. This scheme can help you to stop repossession of your house and you must contact your local council or the county court (where the hearing will take place) to know more about the scheme.
If you are in need of legal advice,
With the availability of different mortgage types, interest rates, and durations, borrowers get befuddled while choosing one of these myriad choices. In most cases, people tend to base their decision on the interest rate and its type (fixed or variable). Though interest rates are important to gauge how much you have to save to pay every month, there are other factors that must be scrutinized as well. Various fees & charges related to your mortgage may not look significant when seen separately, but collectively over a period of time they make the total mortgage cost substantially larger than expected and may play a crucial part in arrears & house repossession.
Some of the common fees & charges related to mortgage are briefly discussed below.
You might find a mortgage deal that is perfect for your financial condition and want to secure it while your loan application is under consideration. That’s what booking fee is for and it’s non-refundable.
Depending on whether you intend to live in the property you are mortgaging, the terms & conditions of your mortgage will differ. Buy-to-let (BTL) mortgages are used for investing in those properties that the borrower wants to rent rather than to use it as his/her home. Majority of BTL mortgages are interest-only because the borrower wants to have a steady income from the rent that is more than the monthly interest payment and sell the property (at a profit) once the mortgage period ends so as to pay the capital. It may be a lucrative investment opportunity, but there are many things that must be taken care of so that mortgage arrears and house repossession could be avoided.
When it comes to residential mortgages, there are many regulatory measures imposed by the government to stop house repossession by lenders. In last few years, these regulatory measures have been quite helpful in reducing the repossession cases. On the other hand, buy-to-let mortgages are seen as business transactions made to gain profits rather than being used for residential purposes;
Many borrowers tend to choose interest-only mortgage over repayment mortgage as they have to pay substantially lower amount during the term of the mortgage agreement. However, this may lead to house repossession if you are not been able to pay the entire capital at the end of the term. A research published by Citizens Advice last year in September showed that out of 3.3 million people in the UK who have interest-only products, there are 934,000 people who do not have taken any investment product so as to pay the capital at the end of the mortgage term. According to a report published by FCA in 2013, there are approximately 600,000 interest-only mortgages due before 2020 and in the coming 30 years this number would be around 2.6 million. If your mortgage is due in this period, it is imperative that you start planning now to pay the capital and stop repossession of your house.
Effective from April, 2014, FCA has asked the lenders to give interest-only mortgages only when borrowers have a credible repayment plan.
In the first three quarters of 2015, mortgage arrears and house repossessions statistics (in the UK) have shown considerable improvement. Better interest rates, decreasing unemployment rate, and effective communication between lenders & borrowers have significantly contributed to these favourable numbers. The numbers for the last quarter of 2015 (yet to be published) are also expected to follow this trend to manifest the appreciable work done by various interested parties.
According to the numbers published by the Council of Mortgage Lenders, the number of repossessed properties in the first quarter of 2015 were 3,100; in the next two quarters, the number of repossessed properties were the same at 2,500. Also, at the end of the third quarter, there were 104,600 loans that had arrears more than 2.5% of the outstanding mortgage balance and this number is 14% lower than the number in the third quarter of 2014 as well as about 2 % lower than the number in the second quarter of 2015. When it comes to mortgage arrears that were more than 10% of outstanding balance,
Financial problems can hit at any time and lack of savings could make paying for expenses harder than you what you expected. The feeling of despair, anger, and exasperation often lead to what is known as the ostrich effect. Rather than thinking that your financial obligations will just vanish, it is better to start finding options that could help you to pay your bills and clear your outstanding debt. Some of the useful tips that could help you to stop repossession of your house are discussed below.
Discuss Your Financial Condition with Your Lender
Generally, as soon as we fall into mortgage arrears, we develop the tendency to ignore any communication with our lender so as avoid receiving bad news. Due to the introduction of pre-action protocol in 2008, you’ll be amazed by how much help your lenders are willing to offer if you reach out to them. It’s even better to have written communication with your lender (about a repayment proposal,
The saying, ‘prevention is better than cure’ applies rather nicely to mortgage arrears. Remortgaging happens to be one of the few options that can help you to avoid mortgage arrears by rearranging the terms of your mortgage. Hence, if done properly, remortgaging can stop repossession of your house even before it starts; though, you have to be thorough with the pros & cons as well as various costs associated with remortgaging. It is imperative that you are well aware of various terms & conditions mentioned in your mortgage agreement before you even start searching for remortgaging options.
Remortgage in its most general form refers to shifting from one lender to another so as to find a better (and/or more flexible) mortgage terms. Better mortgage terms here means that the interest rates are more competitive, certain fees are paid by the new lender, availability of payment holiday, flexibility in switching between repayment & interest-only payments, overpayment option, no or minimal early repayment/exit charges, etc. Sometimes,
You may have heard that lenders can put borrowers on interest-only mortgage for a specific period of time so that borrowers could find an alternate source of income in the meantime to stop repossession of their house. But, what exactly is interest-only mortgage and how it differs from the normal repayment mortgage? In interest-only mortgage, you only have to pay the interest part of the loan during the term of the mortgage i.e. the capital is not needed to be paid until the end of the mortgage term. On the other hand, repayment mortgage demands part of the capital to be paid on monthly basis with the interest. On the surface, paying only interest on monthly basis looks like a great deal but it can backfire easily if you don’t pay attention to some crucial points.
When it comes to interest-only mortgage, there are various options available that can help you to pay the capital at the end of the mortgage term such as endowment policies,
If due to some reasons, you & your lender fail to reach a consensus regarding a repayment plan, then your lender will make the possession claim and the claim will be consequently issued by the county court with the date of hearing. This date of hearing cannot be before 28 days or after 8 weeks from the date of issue of the claim form. Your lender has the responsibility to serve you with the claim form along with the particulars of claim at least 21 days before the scheduled hearing date (Civil Procedure Rules 55.5 (3)(c)). It cannot be emphasised enough that you must attend the hearing to improve the chances of stopping repossession of your house.
Historically, the numbers for borrowers attending repossession hearings are far from impressive and have struggled to touch even 50%. No matter how reluctant the judge may be to grant an outright possession order, if the defendant (borrower) doesn’t bother to come to the hearing, the chances that the judge will rule in the favour of the lender become quite high.
As per the Mortgage & Landlord Possession Statistics for 2015, in July-September term a total of 5,010 mortgage possession claims were filed and 3,447 orders for possession were granted by the county courts. These figures are appreciably lower than the last year’s statistics for the same term. This is generally attributed to the introduction of pre-action protocol which made effective communication between the lender & borrower a pre-requisite for filing possession claims. Hence, a constant and meaningful dialogue to reach a realistic repayment plan is essential for stopping house repossession proceedings.
Through many cases it has been observed that borrowers usually avoid responding to any form of communication made by the lender once they fell into arrears; when possession claim documents are received, borrowers generally get overwhelmed by the situation and rather than talking to their lender or seeking legal advise, they tend to do nothing and wait for the inevitable. There are many avenues opened to borrowers even when possession claim proceedings are under way.