Mortgage arrears and house repossession advice
If you’ve fallen into mortgage arrears, then you can find yourself taking the first steps into what can appear to be a frightening situation – a situation in which everyone else knows the rules except you.
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The mortgage lender’s position
All mortgage lenders are bound by principles set out by the Financial Conduct Authority (FCA) to ensure that consumers are kept appropriately informed before, during and after the point of sale. This includes explaining in full to mortgage customers with mortgage arrears what action may be taken by the lender and when. By explaining what will happen to you if no suitable arrangement is made, a lender fulfils its requirements to the FCA.
What process do mortgage lenders employ?
- They send letters stating that you must make a certain level of payment or you may lose your house.
- They can arrange for a Repossession Hearing in court.
- They can offer you a number of payment plans to help clear your arrears.
- If you end up in court before a judge because your Mortgage Lender has asked for a Repossession Order to be granted – there is a possibility that the order will be granted, but suspended.
The borrower’s position
A mortgage is just a contract between you, the Borrower, and a mortgage lender. In essence, the contract says they will lend you a specified sum of money and you will pay it back. The contract will also detail the period of repayment and various other details, but the main content of the agreement is that they lend and you repay.
So what happens when you fall behind with your payments?
In legal terms, you have breached the terms of the contract. In other words you have failed to keep to the deal you originally made with the mortgage lender. At this point no–one is interested in the why, it is the fact that you have. However, you need to remember that the last thing your Mortgage Lender wants to do is repossess your property and there are remedies that the law can help you with.
The repossession process (getting you to pay back the arrears)
Normally the mortgage lender will write to you and tell you what you have to do to repay your arrears. Often they will ask you to catch up over the next six months or a year.
This is fine if you have fallen behind because there’s been a banking error or because you’ve forgotten to make payments, but it’s often impossible if you have fallen into arrears because you’re struggling to make the regular payment, never mind a bigger one.
When you receive a letter like this the reaction is often despair, anger and frustration. You feel you want to hide from the problem and the last thing you want to do is talk to your Mortgage Lender.
This is a mistake as no matter how bad you feel when you receive these letters the one thing you must do is TALK TO YOUR MORTGAGE LENDER!
Remember the mortgage lender does not want to repossess your house, but if you don’t communicate then you’ll be moved on to the next stage of the process.
By phoning or writing to them to say that you’ll get back to them in a couple of weeks with a plan to repay the arrears will often tick the box, and normally nothing will happen for a few weeks. Then WORK ON THE PLAN
Things you should know
Although the mortgage lender will say you have to repay over 6 months or a year – if that isn’t realistic, you may not have to. If you need to, you may be able to use the whole of the period of the contract to catch up on your payments.
This is because of the outcome of a famous case at the Court of Appeal in 1995: Cheltenham & Gloucester Building Society v Christina Norgan: Arrears on an agreement can be repaid over the full period of that agreement, a court not being obliged to set a shorter period.
So, if you have a 25 year mortgage (a 25 year contract), it may be possible to use the whole of that period to catch up on your payments. In theory, this means that if you are 5 years into your mortgage term and have 20 years to go, you can pay back the arrears over 240 months. If the Lender is willing to extend the term, which depends on individual circumstances.
As discussed earlier, most people get into arrears because another problem has meant that they have not been able to make their payments. It is vital that you sort out this problem, or can identify a date in the future when the problem will be sorted.
If you cannot realistically make the basic payments then you need to ask yourself some hard questions about the reality of staying in the property. So, if for some reason your income has been cut or your partner has lost their job – try and work out when you can start making payments again and catch up on your arrears.
If you are having problems paying other bills such as your credit cards it is important to reduce the level of payment to an amount that leaves you with enough cash to pay your mortgage. You can even make token payments to your unsecured creditors in the short term to get the mortgage back up to date however this will affect your credit rating and your other creditors might take further action against you.
However, you should also have a plan for the unsecured loans and if you’ve got personal loans and credit cards it may well be worthwhile talking to someone at PayPlan who can help you sort out this debt problem on 0800 280 2816 as they see and advise on these kinds of debt problems on a daily basis.
Alternatively, contact us using our Debt Help Form. Before you go back to the mortgage lender, you need to have a plan that you’re comfortable with and can stick to. if you need help, then please call us on 0800 280 2816 and we will be happy to help
Appearing in court to defend a Repossession Order is a difficult experience. If you have to make a court appearance we can offer detailed assistance on what to do, what generally happens and how you can deal with it. Please call us free on 0800 280 2816. And remember, no–one wants to repossess your home if it can be avoided.
Remember, it costs nothing to call PayPlan on 0800 280 2816 or to submit your mortgage arrears and debt problem online. Our professional and experienced debt advisers are here to offer free debt advice on all debt issues.