Debt is the pervasive bane of modern life. It’s a heavy line, but one that rings true with any homeowner. Mortgage arrears is the precursor to house repossession. Should the debt, liability, or obligation expected be overdue, an account is in arrears.

Individuals fall into arrears on their mortgage for many different reasons: accident, sickness, redundancy, unemployment, death of a spouse, insolvency or an increase in mortgage interest rates to name a few. Whatever the case may be, ultimately repossession of one’s home can be attributed to high levels of consumer debt. This debt comes in two forms, secured and unsecured debt. A borrower making payments on their unsecured debts in priority over their mortgage or a level of mortgage borrowing taken out which their income cannot afford can both lead to the loss of one’s home.

But how can a few missed payments of one’s mortgage result in property repossession?

You can breathe easily for a moment. Rarely will property be repossessed over an isolated incident or a couple of missed payments. Borrowers who fall behind on their mortgage repayments are advised to contact their lender at the earliest possible opportunity. Swift action on the part of the borrower can often reduce arrears. 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. Such options include:

  • Capitalizing the arrears, by adding the arrears to the remaining principal balance.
  • Coming to an agreement with the lender to make good on the missed payments over an agreed period of time. This is usually only feasible if the borrower increases the monthly mortgage payments.
  • Paying the mortgage on an interest-only basis for an agreed period. Those paying on a repayment basis won’t have this option. This mode of repayment is only advisable to alleviate immediate pressure.
  • Increasing the term of the mortgage. This will take the effect of reducing the monthly payments, thus making them more affordable;
  • Downsizing to a cheaper property. Though drastic, depending on the situation this might be your best option.
  • Surrendering an investment policy – such as an endowment or an ISA attached to the mortgage. Surrendering such policies will typically result in a significant loss to the investor as very rarely will he or she receive the full value of the policy.
  • The aforementioned are all options that are made when an agreement is reached with the lender. But the lender doesn’t always want to alter a pre-existing mortgage.

Handing back the keys to the lender rarely benefits the borrower. The borrower will still be held responsible for paying the mortgage until the lender has sold the property. This delay will result in an increase in arrears. It must also be understood that prices obtained for repossessed properties are on average less than the market value. The lender’s primary goal, in this case, is to sell the property as quickly as possible in order to recoup their funds. Despite the incentive, don’t bank on the property being sold in a timely manner.

If an arrangement is not made and the arrears situation escalates, it is likely that the lender will seek legal action through the County Courts. The borrower will be notified of the lender’s decision through a letter from the lender’s solicitor.

In order for the lender to take possession of a property, it is first necessary to petition the County Court for a possession order. The borrower will usually receive a court date for the hearing. Before the County Court considers 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 listed courses 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 to the lender as the court deems fit. If the borrower fails to keep up the repayments the borrower will forfeit the house.
  • It can adjourn the case until a later time.

Once a possession order has been granted the court will allow the borrower a certain amount of time to leave the property. 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 the possession procedures which will include; changing the locks, disconnecting utility services, taking gas and electric meters and informing the local police of the possession.

There is still hope to regain the property after it has been repossessed. The borrower can redeem the mortgage up until the point of sale. This may happen should the borrower have been organizing a remortgage during the owner transition 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.

This is the reality of the situation. Having a house repossessed can feel like someone is robbing you of your life. Avoid such a plight by consulting with Affiliated Mortgage. Our team of real estate experts will find home financing solutions that fit your needs.  

Debt is the pervasive bane of modern life. It’s a heavy line, but one that rings true with any homeowner. Mortgage arrears is the precursor to house repossession. Should the debt, liability, or obligation expected be overdue, an account is in arrears.

Individuals fall into arrears on their mortgage for many different reasons: accident, sickness, redundancy, unemployment, death of a spouse, insolvency or an increase in mortgage interest rates to name a few. Whatever the case may be, ultimately repossession of one’s home can be attributed to high levels of consumer debt. This debt comes in two forms, secured and unsecured debt. A borrower making payments on their unsecured debts in priority over their mortgage or a level of mortgage borrowing taken out which their income cannot afford can both lead to the loss of one’s home.

But how can a few missed payments of one’s mortgage result in property repossession?

You can breathe easily for a moment. Rarely will property be repossessed over an isolated incident or a couple of missed payments. Borrowers who fall behind on their mortgage repayments are advised to contact their lender at the earliest possible opportunity. Swift action on the part of the borrower can often reduce arrears. 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. Such options include:

  • Capitalizing the arrears, by adding the arrears to the remaining principal balance.
  • Coming to an agreement with the lender to make good on the missed payments over an agreed period of time. This is usually only feasible if the borrower increases the monthly mortgage payments.
  • Paying the mortgage on an interest-only basis for an agreed period. Those paying on a repayment basis won’t have this option. This mode of repayment is only advisable to alleviate immediate pressure.
  • Increasing the term of the mortgage. This will take the effect of reducing the monthly payments, thus making them more affordable;
  • Downsizing to a cheaper property. Though drastic, depending on the situation this might be your best option.
  • Surrendering an investment policy – such as an endowment or an ISA attached to the mortgage. Surrendering such policies will typically result in a significant loss to the investor as very rarely will he or she receive the full value of the policy.
  • The aforementioned are all options that are made when an agreement is reached with the lender. But the lender doesn’t always want to alter a pre-existing mortgage.

Handing back the keys to the lender rarely benefits the borrower. The borrower will still be held responsible for paying the mortgage until the lender has sold the property. This delay will result in an increase in arrears. It must also be understood that prices obtained for repossessed properties are on average less than the market value. The lender’s primary goal, in this case, is to sell the property as quickly as possible in order to recoup their funds. Despite the incentive, don’t bank on the property being sold in a timely manner.

If an arrangement is not made and the arrears situation escalates, it is likely that the lender will seek legal action through the County Courts. The borrower will be notified of the lender’s decision through a letter from the lender’s solicitor.

In order for the lender to take possession of a property, it is first necessary to petition the County Court for a possession order. The borrower will usually receive a court date for the hearing. Before the County Court considers 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 listed courses 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 to the lender as the court deems fit. If the borrower fails to keep up the repayments the borrower will forfeit the house.
  • It can adjourn the case until a later time.

Once a possession order has been granted the court will allow the borrower a certain amount of time to leave the property. 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 the possession procedures which will include; changing the locks, disconnecting utility services, taking gas and electric meters and informing the local police of the possession.

There is still hope to regain the property after it has been repossessed. The borrower can redeem the mortgage up until the point of sale. This may happen should the borrower have been organizing a remortgage during the owner transition 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.

This is the reality of the situation. Having a house repossessed can feel like someone is robbing you of your life. Avoid such a plight by consulting with Affiliated Mortgage. Our team of real estate experts will find home financing solutions that fit your needs.  

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