What happens when your house gets repossessed? No one wants to experience this situation, particularly if you have young children involved too.
So what happens when your house gets repossessed? Sadly, since the ‘credit crunch’ of 2008, the number of house repossessions has been on the rise, slowing down only recently thanks to the Bank of England maintaining low interest rates over a number of years. With the discrepancy in house prices across the country resulting in some new buyers taking out large mortgages again, the number of house repossessions may rise again as and when interest rates rise.
What happens when your house gets repossessed and interest rates are due to rise?The Governor of the Bank of England, Mark Carney, has stated that interest rates will rise when unemployment figures reduce below a certain level; with the economy growing, some experts are predicting that rates may rise, however, no one knows for sure and it may not be in the Government’s interests to see rates rise so soon.
Will a rise in interest rates affect my ability to pay?
A rise in interest rates will affect house owners who are on a variable rate; those home owners who are on a fixed rate will not be affected until the fixed rate period ends. Many people will be caught out by interest rate rises, particularly those in London and the surrounding areas as the cost of housing is so high. This has resulted in home owners borrowing a multiple of 4 times their salary in order to be able to afford a property in London and the South East.
Other reasons people face eviction because they fall behind on their mortgage payments are divorce, loss of income or serious illness, this is why it is important to take out insurance or accrue at least 3 months’ mortgage payments in the form of savings, to cover you in case you experience some difficulties or change in circumstances. This will give you time to sort things out, hopefully, and enable you to stay on track with your mortgage payments.
Before you go to CourtBefore taking you to Court, your mortgage lender must tell you how much you owe; consider any request from you to change the way you pay your mortgage and respond to any offer you make; give you a valid reason for turning down your offer; give you reasonable time to respond to their proposals and give you 15 days warning in writing if they plan to start Court action; tell you the time and date of any Repossession Hearing and let your local Council know within 5 days of getting notification of the date of the Court hearing just in case you need to apply for emergency housing from your Council.
You may be able to get legal help under the Housing Possession Court Duty scheme that covers County Courts in England and Wales. This will provide you with help on the day of the hearing with someone who can represent you and help you come to an arrangement with your mortgage lender to pay off your debts. The judge has various options available to them:
- Adjourn (delay) the Hearing
- Set aside the case, which means no Order will be made and the hearing is finished
- Make a Repossession Order
- Outright Possession Order
- This gives the lender a legal right to your home on the date given in the Order (sometimes called an ‘Order for Possession’). This is usually 28 days after the Court hearing.
If you don’t leave your home by the date given in the order, your lender can ask the Court to evict you. Suspended Possession Order If you make regular payments you will be able to stay in your home. Money Order This means that you have to pay the lender the amount set out in the Order. If you don’t make these payments, Court action that can ensue, could include:
- Deducting money from your wages or bank account
- Sending bailiffs to take away things you own
- Your lender can’t use a money order to evict you from your home. If you don’t make payments set out in a Money Order on time, your lender could go to Court again. As a result, the judge could decide to give them a Possession Order.
Possession Order with Money Judgement A Money Judgement is usually added to a Possession Order. It means you owe a specific amount of money usually made up of:
- Mortgage arrears
- Court fees
- Your lender’s legal costs
A money judgement won’t apply if:
- you pay your mortgage arrears and any amount set out in a Suspended Order
- your lender sells your home and the sale price is more than the amount set out in the money judgement
- If you don’t pay the amount set out in the money judgement, the lender may ask the Court to carry out the instructions in the Possession Order and the judgement.
What happens when your house gets repossessed and there’s a Time Order?
- changing the regular amount you pay
- changing the interest rate on your mortgage
- delaying the next time you have to make a payment
- If you don’t make the payments, your lender can ask the Court to evict you.
A Time Order is usually only made on some types of loan like a second mortgage. You can ask a judge to ‘suspend the warrant for possession’. This means delaying the eviction or allowing you to stay in your home if you are able to make payments again. If you feel you are in serious need of help, the main charities and debt advice services to contact are:
- Stepchange Debt Charity (formerly CCCS): Full debt help service – call 0800 138 1111
- National Debtline: Full debt help service – call 0808 808 4000
- Citizens Advice Bureau: Full debt and consumer advice service – visit your local CAB centre
We hope our article “What happens when your house gets repossessed?” has helped you. Are you in a simular situation? Do you have ideas for anyone that may need help? Leave a comment below and help spread the knowledge.