Mortgage Repossession - A Basic Guide
An overview of what happens if you fall behind on your mortgage
payments. This article also looks at mortgage arrears and
People in today's
society will have differing attitudes to debt and debt
repayment. There will always be those individuals who take a
very relaxed attitude to debt and debt repayment, however the
vast majority will take the matter very seriously and in the
case of property ownership, they will take any realistic action
to make their mortgage repayments on time.
Unfortunately there will always be situations out of the
control of even the most conscientious borrower.
Individuals fall into arrears on their mortgage for many
different reasons; accident or sickness, redundancy or
unemployment, death of a spouse, insolvency or hikes in
mortgage interest rates to name just a few.
The most common reason for property repossession in current
times can be attributed to general high levels of consumer
debt. This comes in two forms, secured and unsecured debt.
Whether this is due to the borrower making payments on their
unsecured debts in priority over their mortgage or a level of
mortgage borrowing taken out which their income cannot
But how can a few missed payments on the mortgage lead to
Very rarely will a property be repossessed over an
isolated incident of a couple of missed mortgage payments. The
advice given to borrowers who fall behind on their mortgage
repayments is to contact their lender at the earliest possible
To sell your property FAST, submit
your details. You can sell
your house in 24 hours.
Speedy action on the part of the borrower can often reduce
the potential arrears and put them on the road to recovery.
Delaying action is likely to result in increased mortgage
arrears and ultimately could lead to property repossession.
Borrowers have a number of options available to them in the
early stages of mortgage arrears. These will include:
- Capitalising the arrears;
- Coming to an agreement with the lender to make good the
missed payments over an agreed period of time. This is
usually only a viable solution if the borrower can afford
to increase the monthly mortgage payments;
- Paying the mortgage on an interest only basis for an
agreed period. Of course this will only be an option open
to those paying the mortgage on a repayment basis. This
method is viewed as an immediate short term solution to
relieve the immediate pressure as the arrears will still be
- Increasing the term of the mortgage. This will take the
effect of reducing the monthly payments, thus making them
- Downsizing to a cheaper property. This could allow the
borrower to use the cash raised to settle the arrears. This
of course is not always a viable option as it is dependant
on the seller finding a buyer for the property and so
- Surrendering an investment policy, such as an endowment
or an ISA attached to the mortgage. Surrendering such
policies will usually result in a significant loss to the
investor as very rarely will he or she receive the full
value of the policy. Consideration must then be given as to
how the mortgage will be repaid at the end of the term with
no repayment vehicle;
But what happens if an agreement with a lender cannot be
made, or a solution found to clearing the arrears?
Handing back the keys to the lender is rarely a good
The borrower will still be responsible for paying the
mortgage until the lender has sold the property. This will lead
to more arrears and arrears charges being made. It must also be
understood that prices obtained for repossessed properties will
usually less than the market value.
The lenders primary aim in this case is to sell the property
as quickly as possible in order to recoup their funds.
If an arrangement is not made and the arrears situation
escalates then it is highly likely that the lender will seek a
legal remedy through the County Courts. The borrower will first
be notified of this through a letter from the lenders
In order for the lender to take possession of a property, it
is first necessary to petition the County Court for a
The borrower will usually receive a court date for the
hearing. Before the County Court will even consider granting a
possession order it first has to be satisfied that every avenue
has been explored by the lender and borrower.
The County Court will take the view that possession should
be the very last resort. The County Court may take one of three
course of action:
- It can grant an outright possession order. This will
enable the lender to take possession of the property which
will usually happen within 28 days;
- It can grant a suspended possession order. This will place an
obligation on the borrower to make payments in
accordance with the courts decision, with the suspended
possession order enforceable if the borrower fails to
keep up the repayments.
- It can adjourn the case until a later time.
Once a possession order has been granted the court will also
decide a date on which this order is enforceable. The lender
can then take steps to take possession of the property.
Once the lender has obtained vacant possession of the
property, they will then follow there possession procedures
which will include; changing the locks, disconnecting utility
services, taking gas and electric meters and informing the
local police of the possession.
Even after the property repossession, the borrower can still
redeem the mortgage up until the point of sale. This can
sometimes happen if the borrower has been organising a
remortgage during this process.
In the event of the lender losing money on the proceeds of
the sale, it may take further action if it believes the
borrower has the financial means to make good the loss.
back to the Useful Articles section
About Our Guest Author:
James Copper is a finance writer and works as the head of
mortgage repossession and mortgage arrears for Any Loans.