As a homeowner am I running the risk of repossession?

Homeowners and Mortgages

It is unusual for individuals in the United Kingdom owning their homes outright with the more common route being that they pay a deposit on the property initially and secure a mortgage on the value of the property whereby they effectively borrow the money to pay for the property and pay it back in installments to the mortgage company.

Problems with the economic downturn

When the economic downturn first became a reality in the United Kingdom in 2008 the issued faced by many families when members lost their jobs, were made redundant or may have had certain issues with the family business was that they started to default on making the payments to the mortgage lender.

What can happen if the individual owning the property fails to make the payments?

It is a distinct reality that if an individual who owns a property fails to make the payments back to the mortgage lender on a consistent basis the house can subject to a repossession order.

What does this mean?

A repossession order is an order which is applied to the Court by the mortgage lender in order for the property which is the subject of the mortgage to be repossessed by the mortgage lender enabling them to recoup back some or all of the value of the property.

How will the value of the property be recouped?

It is likely that the value of the property will be recouped by the house being sold in an auction following the repossession order.

What should I do if I have been provided with a repossession order?

If an individual has received a repossession order there may still, however, be an opportunity to prevent the home from being repossessed.

Once proceedings for repossession have begun there is quite a big time period that will be allowed before a repossession order is enforced. In some cases the order can be adjourned during which time the individual owner of the property may be able to pay off the arrears owed. 

What happens if I know that I will be able to make the payments?

If an individual owner of a property knows that they will be able to make the payments to the original mortgage agreement the court may “stay” the order.

What does this mean?

This means that an order will be made for repossession but will not be enforced for an agreed amount of time which will give that individual the opportunity to repay the amount owed or to repair the breach in the original agreement.

What happens if there is no way in which I will be able to make the payments?

If there is no chance that an individual will be able to make the payments then the order for the repossession of the property will go through and the owner of the property will be provided with a date whereby they are requested to vacate the property.

Will repossession always be used as a last resort?

In 2008 the then Prime Minister of Britain urged mortgage lenders to only use repossession as a last resort. This meant that they should seek all other alternatives before they applied to the court for grant of a repossession order.

This required that lenders must prove in court that they had taken all necessary steps prior to the court hearing to ensure that the individual borrowing the money from the mortgage company had the opportunity to negotiate.

Was this the case?

Shortly following this statement a high court ruling provided mortgage lenders with the power to repossess homes without needing to apply for the necessary court order to do so. However, at the time it was felt that this would more likely be done in the commercial property world rather than the residential.

Is it just individuals who are having money troubles that run the risk of repossession?

It may be felt by many that it is only those individual home owners that are having specific money problems that face the risk of repossession of their property; however, this is not always the case. Since the start of the economic downturn individuals who own high value properties and who lease them out to tenants are running the risk of repossession when their tenants run into their own financial difficulties.

In a case whereby tenants may to keep up with the rental payments under a residential lease this is having a knock-on effect meaning that the owner of the property is then unable to keep up with the mortgage payments.

Consequently all landlords should ensure that they are extremely vigilant in making sure that they take early action against tenants who start to default with the rental payments.