With over 100,000 properties repossessed in the last two years, the prospect of losing your property if things go wrong is no myth. We are constantly being warned that repossession is on the rise but how many of us would know what to do if our home was at risk?
Repossession does not happen overnight. There are regulations that must be followed by your lender before things reach repossession stage. However, it is important to remember that if you have missed mortgage payments and you fail to take action or choose to ignore the warning signs then losing your home could become a likely possibility.
If you fall behind with your repayments, there are measures that can be taken to help avoid the repossession nightmare.
Contact your lender immediately.
Many people who are behind with mortgage payments do not contact their lender as they are worried it will make the situation worse however this should always be your first step.
â€˜Pre-action protocolsâ€™ are conditions agreed to by mortgage lenders. In this situation, these are set to ensure that the lender must act â€˜fairly and reasonablyâ€™ towards borrowers in the resolution of any mortgage-related matters.
They must act in a manner that is not beguiling, giving you a fair chance to hold onto your asset. These regulations also state that lenders must consider â€˜reasonable requestsâ€™ for changes to the date/method of payment from the borrower, following the outlined notice periods at each stage.
It is important to make your lender aware of your situation. You must demonstrate that you are willing to make repayments which are affordable in your current circumstances and you will pay these as often as you can. You could also ask the lender to extend your mortgage term as this will lessen the monthly repayments. Any adaptations to the standard payment procedure which are agreed should be documented in writing.
These protocols are important as if the case goes to court as you must both prove that you have followed them and acted in a reasonable manner.
2. Acknowledge all correspondence.
If you miss your mortgage repayments, you will receive a letter from your lender called â€˜a notice of defaultâ€™. It is important that you read this thoroughly as it provides you will an outline of exactly how much is owed and the action which your lender is going to take.
If you do not respond to this letter or fail to take action to arrange an agreement, your lender can start to take legal action at this stage.Therefore it is important speak to your lender as soon as you receive this notice as an agreement could still be reached.
3. Rent out.
How often do you use your guest room? Renting out a room could boost your monthly incomings and help you to make payments. Many people look for short-term lets nowadays so this could be an option to help you through the difficult times.
Also think about renting the house in order to meet the repayments. Could you go and stay with family and rent out your house for a short period in order to generate cash flow and meet repayments? It is important to check the terms of your mortgage agreement as your lender may not agree to this.
4. Try to avoid borrowing any more money.
Try not to pay off debt with more debt. Borrowing money from a source in order to meet your repayments will be a temporary fix but not a solution to the overall problem. Remember that you will have to pay that money back as well. Instead it is better to look at different methods to manage the overall problem long-term.
5. Donâ€™t be afraid to ask for help.
Worrying about repossession can be a very daunting time but you should not suffer alone. There are a number of ways of which you can seek help from trained professionals every step of the way.
The first port of call is to acknowledge the problem and make your mortgage lender aware of the situation.