What does repossession mean?

When you fall behind on mortgage payments, the term “repossession” might enter your mind– and it’s a word that can cause real worry.

Put simply, repossession happens when your mortgage lender takes ownership of your home because of missed payments.

But it’s not an overnight process, and you have more options than you might think. This guide explains what repossession means in practical terms, how the process works in the UK, and most importantly, what you can do at each stage to protect your home.

Understanding Property Repossession

Repossession occurs when a mortgage lender reclaims a property after the borrower breaks the terms of their mortgage agreement – usually by missing payments. It’s a legal process that allows the lender to sell the property to recover the money they’re owed.

In the UK, repossessions remain relatively uncommon. Recent figures from UK Finance show there were 610 homeowner repossessions in the final quarter of 2023, representing just a tiny fraction of the 11 million mortgages in the country.

Lenders view repossession as a last resort because it’s expensive, time-consuming, and often results in financial losses for them. They’d much rather work with you to find a solution. The process usually takes 6-12 months from first missed payment to actual eviction, giving you time to resolve the situation.

The Repossession Timeline: What to Expect

The path to repossession follows a set legal process with several clearly defined stages:

1. Early arrears: After 2-3 missed payments, your lender will contact you to discuss your situation. This is the best time to act.
2. Formal demand: If payments remain outstanding, you’ll receive a formal letter asking you to bring your account up to date, usually giving you 14 days to respond.
3. Default notice: This official document states you’ve broken your mortgage terms and gives you an opportunity to catch up.
4. Court action: If the situation isn’t resolved, your lender applies to court for a possession order. You’ll receive court papers with a hearing date.
5. Court hearing: A judge decides whether to grant a possession order immediately or suspend it while you make payments.
6. Eviction: If a possession order is granted and you don’t leave, bailiffs can be authorised to evict you.

This entire process gives you multiple opportunities to resolve the situation before losing your home.

Your Rights Throughout the Process

The law provides significant protection for homeowners facing repossession. Before taking court action, lenders must follow the Pre-Action Protocol for Mortgage Arrears.

This means they must:

• Treat you fairly and consider any reasonable proposal to pay
• Give clear information about the amount you owe
• Consider alternative options to repossession
• Respond to your requests to change how you pay

Even after court proceedings begin, judges have wide discretion to suspend possession orders if you can show you’ll be able to make payments. You also have the right to attend the hearing, present your case, and seek free legal representation from services like the court desk scheme.

Taking Action to Prevent Repossession

The most effective way to prevent repossession is to act quickly as soon as you know you’ll struggle with payments:

Talk to your lender: Contact them before missing a payment if possible.

Lenders have obligations to consider forbearance options like:

• Payment holidays
• Extending your mortgage term to reduce monthly payments
• Temporarily switching to interest-only payments
• Adding arrears to your outstanding balance

Check benefit entitlement: Support for Mortgage Interest (SMI) helps some homeowners with interest payments. While it’s now a loan rather than a benefit, it could keep you afloat during hardship.

Seek free advice: Organisations like Citizens Advice, Shelter, and StepChange offer free, impartial guidance on dealing with mortgage problems.

Review your budget: Look for ways to prioritise your mortgage payments over less essential expenses. Even making partial payments shows goodwill and can help negotiations.

Common Misconceptions About Repossession

Many homeowners panic because of misunderstandings about the repossession process:

“My home will be taken immediately if I miss a payment”: In reality, lenders must follow a lengthy process before repossession can happen.

“Banks are eager to repossess homes”: Actually, repossession costs lenders money. Research shows banks lose an average of £40,000 per repossessed property, so they’re motivated to find alternatives.

“Once court papers arrive, it’s too late”: Court action doesn’t mean automatic repossession. Many cases are resolved through payment plans agreed at or before the hearing.

If Repossession Seems Unavoidable

Sometimes, despite best efforts, keeping your home may not be possible. In these cases, taking control of the situation can lead to better outcomes:

Voluntary sale: Selling your home yourself will likely achieve a higher price than a forced sale, potentially preserving some equity and your credit rating.

Assisted voluntary sale schemes: Some lenders offer schemes that give you time to sell while freezing interest and charges.

Handing back keys (voluntary surrender): While not ideal, this can be less damaging than formal repossession if you have no alternatives.

If your property sells for less than your mortgage balance, you’ll still owe the difference (shortfall). However, many lenders are open to affordable repayment plans for this remaining debt.

After Repossession: Moving Forward

A repossession will remain on your credit file for six years, making borrowing more difficult and expensive. However, its impact diminishes over time, especially if you maintain good financial habits afterward.

For immediate housing needs, your local council has obligations to help prevent homelessness. You may qualify for social housing or housing benefit to support private renting.

Rebuilding your finances takes time, but isn’t impossible.

Focus on:

• Creating a sustainable budget
• Building a savings buffer
• Using credit carefully to rebuild your score
• Getting professional debt advice if needed

Many lenders will consider a new mortgage application 3-6 years after repossession, especially if you can demonstrate that your circumstances have changed.

Next Steps

If you’re worried about mortgage payments or have already missed some, take action today. The earlier you address the situation, the more options you’ll have:

1. Contact your lender to discuss your situation
2. Seek free, independent advice from housing or debt charities
3. Review your budget and prioritise mortgage payments
4. Consider speaking with a mortgage broker about refinancing options

Remember, many repossessions are prevented through early intervention. For personalised advice about your mortgage options, contact Drake Mortgages – we can help assess your situation and identify the best path forward.