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Stop repossession in its tracks - but how? What are your options..?

Repossession is a serious business. How you stop repossession happening to you depends on timing, your circumstances and resourcefulness. The key questions are around why you are in arrears or why you're struggling to make payments.

Pre-arrears

  • cut down your monthly mortgage costs and outgoings
  • increase your income
  • remortgage/refinance
  • borrow 'soft' money from family/friends
  • plan to sell your property/find a buyer
  • sell other assets

    In arrears or legal action

  • reach a deal with your lender
  • switch to a more sympathetic lender
  • sell your property/find a buyer

    The money side of things - dealing with arrears

    If you are facing a temporary financial setback then it makes sense to explore refinancing/remortgage options with your current lender. Try to do this before arrears start to mount up. Or explore whether you can adjust your mortgage in some way. For example:

  • by switching from a repayment to an interest only mortgage
  • by increasing the term
  • adding arrears to the loan (called 'capitalising' the arrears)
  • taking a 'payment holiday' for a set period of time

    If you have a less than perfect credit history but want to consider switching to another lender make sure you ask your broker about the attitude and policies of the various sub prime lenders. Otherwise the decision to take out a new mortgage with lots of penalties may come back to haunt you. If you are uncertain how precarious your financial position is, sub prime lenders are probably best avoided altogether. Effectively you may only only stop repossession by one lender to find yourself in more expensive difficulties later.

    Stop repossession by selling

    To stop repossession by selling your property is really a last resort. Obviously exhaust all other options before you decide to sell, unless it suits you to start-over. If you do decide to sell your property try to put plans in place before you fall into arrears. That way you'll have more flexibility.

    Some estate agents are both willing and able to devise special marketing solutions for home owners in arrears (but not the subject of legal action) with a view to getting a quick sale. If you decide to sell before you are the subject of legal action, it is worth phoning round to find a suitable estate agent. But you do need to be open with them about your situation.

    Alternatively if you need a speedy and certain sale you could find a cash buyer. Cash buyers will settle your arrears as part of the process of buying your property. The down-side is that the offer for your house will be correspondingly lower. But as long as you have some equity in your property you will be able to walk away mortgage-debt free. But it's not always possible to find a fair cash buyer at short notice.

    Some house sellers mistakenly believe they are "trapped", unable to sell to a cash buyer because of exit/redemption penalties or secured loans. This is not always the case.

    How not to stop repossession

    It's always financially better for you to sell your property to stop repossession than for you to hand the keys back to your lender and walk away. After all, by handing your keys back you're losing control.

    Lenders have traditionally focused on getting their own money back as quickly as possible rather than holding out for an offer close to the open market value.

    In some areas where certain types of property are in demand, you might be lucky. We are aware of estate agents who have received directives from 'head office' that all repossessed properties must be sold to best and final bids.

    In 1994 the Financial Services Authority(FSA) took over the regulation of most mortgages. It was only years later that the FSA strengthened the protection available to borrowers who fall into arrears.

    It is true that lenders are required to market a property promptly and obtain the best possible price..taking into account all the circumstances of the sale.

    Research suggests that where lenders fail to recover the full amount of the loan (more than 50% of all cases) the shortfall is in often in excess of 20%.

    The fact remains that many people seek assistance post-repossession with legal action on mortgage shortfalls or mortgage shortfall debt claims in an attempt to reach a settlement. Failing to stop repossession doesn't end the worry.

    The choice is ultimately yours.

    Getting unbiased, free advice

    You'll find the best places to get unbiased advice and information are the various 'no cost' organisations like the Citizens Advice Bureau. You might then be counselled to seek legal advice. You might try:

    Citizens Advice Bureau - you can use the search function to find your nearest branch of CAB
    Advice Guide - the online service from the Citizens Advice Bureau. There are fact and information sheets to download
    The Consumer Credit Counselling Service - this service also operates a Helpline at 0800 138 1111
    National Debtline - information on mortgage shortfalls and budgeting
    Shelter - Shelter operates a free housing advice line on 0808 800 4444 and you can use a search facility to find a local adviser. Has comprehensive information on the repossession process in both Scotland, and England and Wales

    It may be possible to stop repossession at any time. Even at an initial Possession Hearing a number of outcomes are possible. Remember your lender only pursues repossession as a last resport. The courts also recognise that repossession is the end of the road. So all things being equal they want to stop repossession too.

    It's relatively easy to have a Possession Order suspended if you pay the current month's mortgage payment plus something towards the arrears. This can be as little as 10. This is essentially a 'good faith' arrangement..so while it can give you more time to remedy your situation...the important point to note is that if you subsequently default your lender may then move to apply for a Possession Warrent to force eviction.

    A cautionary note

    Even a Possession Warrent may not end in eviction but only if you seek help (legal, financial). If you decide to deal with your lender directly be careful how you deal with time critical communications. We have come across examples where money has been sent to lenders who have then been slow to update the court on the homeowner's change of circumstance...

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