It’s important that you and your lender work together to find a feasible repayment plan so as to avoid house repossession proceedings. To safeguard the interest of consumers, all regulated mortgage contracts taken out on and after October 31, 2004, are governed by the rules & principles of FCA (Financial Conduct Authority). Hence, lenders (as well as borrowers) must comply with these rules and principles of FCA in addition to pre-action protocol. To stop house repossession, the law demands completion of many steps and an outright possession order is only given when all else fails. Therefore, rather than evading your lender, try to reach a repayment plan which is acceptable to both of you.
As per FCA and pre-action protocol, lenders are required to be sensitive to the situation of borrowers and make every effort possible to reach an agreement with them. If you are taking mortgage help from an institution which is representing you, then your lender should cooperate with the institution as well.
Handing over the keys to your lender must be seen as a last resort as there are number of options available that could help you to stop repossession of your house. From the time you take out a mortgage till the time eviction by bailiffs is completed, at every step there are options that could be availed. Rather than giving up on your home, try all of the options discussed below to save your house from repossession.
Continuous Communication with Your Lender
Pre-action protocol dictates that your lender (as well as you) must consider every option possible so that any mortgage arrears could be paid without the request of a possession claim. In fact, every lender has to mention the steps taken to avoid repossession on a form known as Form N123 before making a request for possession claim. If you or your lender has an alternate repayment plan, then the other party is legally bounded to consider it and reasons for refusal must be given in writing.
It may sound trivial, but the best way to avoid house repossession is to know how much mortgage you need and your capability to pay it considering any future mishaps. There are different types of mortgages available in the market and their terms & conditions vary; given you’re financial standing, you may find one mortgage type to be more beneficial than the other ones. Hence, it becomes imperative to understand what exactly a mortgage type offers in terms of monthly payment amount, interest, period, and flexibility in these three.
Most mortgage types can be broadly categorised as fixed rate mortgages, or variable rate mortgages. Both of these types are briefly discussed below.
Fixed Rate Mortgages
As the name suggests, in this type, the interest rate will be fixed for the entire length of the deal and any external fluctuations in rates will not have an impact on the interest you will pay. This deal is usually offered as a 3-year or 5-year fixed rate deal,
When you are in financial crises, any monetary assistance could go a long way to prevent your lender from starting a possession claim. Over the years, various benefits related to mortgage payments are curtailed by the government (such as mortgage rescue scheme). However, there is one avenue still open to borrowers that could be helpful in stopping house repossession: Support for Mortgage Interest (SMI). If you are already a recipient of income support, income-based jobseeker’s allowance, income-related employment & support allowance, or pension credit, then you are eligible for SMI and government will pay the interest part of your monthly mortgage payments.
The waiting period for SMI at the moment is 13 weeks from the date you claimed one of the benefits mentioned above; however, in the case of pension credit, there is no waiting period and mortgage interest payments are made to the lender once the claim is made. It’s important to mention here that the rate at which SMI is given could be different than the original mortgage interest rate as SMI is governed by the average mortgage rate of the Bank of England.
It could happen that when you applied for mortgage, you had a steady source of income and thought that there is no need to take extra measures for ensuring continuous payment on mortgage; however, unforeseen problems such as serious illness, redundancy, accident, disability, etc. can make it extremely difficult to stay current on various payments and other expenses. There are many options available that can help you during this financially difficult time. One of these options that could help borrowers to avoid mortgage arrears is mortgage payment protection insurance (MPPI).
In the event you become incapable of paying your mortgage due to illness, accident, or redundancy, then mortgage payment protection insurance will pay your monthly mortgage for a specified period of time. MPPI could be taken only for illness & accident, exclusively for redundancy, or together for illness & accident and redundancy. The payout period varies from policy to policy, but in most cases it is 12 months. The duration between the claim and payout,
Once a house repossession action is started by your lender, the county court (where the possession claim is filed) will send you certain documents to inform you about the same. These documents include a defence form and copies of the possession claim forms that detail the amount of outstanding arrears, monthly payment amount, repayments plans proposed by the lender, etc. Though you can take the defence form with you to the court on the day of hearing, however, you must submit it to the county court within 14 days of receiving it to avoid paying any costs caused by the delay.
At the top of the defence form (Form N11M, mortgaged residential premises) name of the court, claim no., name of the claimant (lender), your name (defendant), and the date of the hearing are mentioned. If you don’t agree with the details of the property, amount of the mortgage arrears, and/or the mortgage agreement as given in the particulars of claim, you can put your defence by mentioning the correct details on this form.
When all your efforts to stop house repossession fail and you decide to sell your house quickly to avoid incurring further mortgage related expenses, you may come across terms such as exchange with delayed completion and lease options. Though they are commonly associated with commercial properties but they have made their way into residential properties as well. Though they could help you with your mortgage debt, however, there are many things that could go wrong, making your debt condition even worse.
Exchange with Delayed Completion (EDC)
EDC is a signed contract in which the buyer commits to purchase the mortgaged property (mostly at a price significantly lower than the price in the open market) from the seller at a future date and pays an amount to the seller. This future date is normally in years and during the course, the buyer pays out the mortgage debt on the property and also pays for the maintenance & improvements in the house.
Missing 2-3 monthly mortgage payments will create a mortgage debt and your lender is going to contact you to know the reason of default (as needed by the pre-action protocol). There are different ways to make up for the missed payments and they must be analysed thoroughly to know which one will suit you the best. Rather than waiting till the time your lender starts the court action, it’s imperative to reach an agreement on how you could repay the mortgage arrears. Some useful tips for paying mortgage arrears to stop repossession of your house are discussed below.
Mortgage Payment Protection Insurance (MPPI)
Many lenders while providing loan ask borrowers to take out an insurance policy which pays for the monthly payments in the event a borrower fails to do so due to various reasons such as illness, unemployment, fatal accident, or disability. In most cases, premium of MPPI is clubbed with the mortgage payment; though, your lender must explain to you separately the cost breakup of both elements.
According to the pre-action protocol, lenders as well as borrowers must made every effort possible to reach an agreement for the payment of mortgage arrears. However, if you don’t have an income source to stop the house repossession and no likelihood to receive any type of payment (from claims, inheritance, job, etc.) to pay your mortgage, then it’s better to start thinking about selling your house to cover the mortgage before the mortgage payments, interests, & other expenses become too steep. There are some important points that must be kept in mind if you have decided to sell your property.
Once the mortgage debt gets out of hand, most people handover the keys to their lender to sell the property, or do nothing and wait for eviction to happen. However, there are some compelling reasons that make it better for borrowers to sell their house on their own. Till the time the property is not sold by the lender, you are legally responsible to make monthly mortgage payments,
Contact Stopping Repossession UK as soon as you get the 15 days’ written warning from your lender so as to get more time and options for saving your house
How Stopping Repossession UK could help You
- We’ll do a comprehensive review of your paperwork to ascertain all possible remedies
- Appoint a free solicitor to attend the court proceedings to stop the possession claim & reach an amicable agreement with your lender
- We’ll take care of all legal compliances and make required arrangements to stop the repossession of your house
- If you can’t pay in any way possible to your lender, then we can also buy your house within days irrespective of the condition of your house