Falling behind on your mortgage is one of the most stressful situations a homeowner can face. If you are in mortgage arrears, you may be wondering what happens when a house is repossessed, what legal rights you have, and what steps you can take to prevent things from reaching that stage.
As a property buying company, we work with people in this situation every day. The good news is that repossession is always considered a last resort, and there are options available to you. By understanding the process and acting quickly, you can regain control and often find a better outcome than allowing repossession to happen.
Key takeaways:
* Repossession doesn’t happen straight away once you miss mortgage payments.
* There is a process that the lender must adhere to when repossessing a property.
* If you engage with the process it may be possible to stop your property being repossessed.
* The lender won’t start repossession proceedings until at least 3 payments have been missed.
* The repossession laws are different in England and Scotland. The following article applies to Scottish law.
Early arrears and communication
If you miss a mortgage payment your lender will usually contact you quickly to discuss the situation. Lenders prefer to avoid repossession and often offer solutions such as repayment plans, payment holidays, or adjustments to your mortgage term. They will not start the repossession process until at least 3 payments have been missed. It is important to engage with the lender at this stage.
When are formal notices issued?
If arrears continue, your lender may issue a default notice. This is an official notice from the lender, filed with the courts that asks the borrower to repay the arrears.
They may instead choose to issue a calling-up notice. This letter effectively ends the mortgage and asks the borrower to repay the loan. It will give the lender at least 2 months to repay the full loan amount. At this point it is still possible to renegotiate repayment with the lender.
If you reach this stage it is often recommended that you seek advice from Shelter Scotland or Citizens Advice Scotland.
Where do repossession proceedings take place?
In Scotland, repossession proceedings take place in the sheriff court. If no agreement is reached, the lender can apply to the court for a court decree for repossession. The homeowner will be given the opportunity to attend the hearing and respond.
At this stage, it is important to present any evidence of financial difficulties or repayment proposals. The sheriff may grant a decree immediately, or may delay action to allow you time to reach an agreement with your lender.
Court decision and enforcement
If a sheriff issues a repossession decree, the lender can instruct sheriff officers to enforce it if you do not voluntarily leave the property. The decree will set out a specific date by which you must vacate the home.
Non-compliance can lead to forced removal, but in many cases, lenders and sheriffs will work with homeowners to find a practical solution before eviction.
What happens to a property after repossession?
After a repossession, the lender will sell the property, usually at auction or through an estate agent, to recover the outstanding mortgage debt.
If your property sells for less than the amount you owe on your mortgage, you are still legally responsible for paying the shortfall. For example, if your mortgage debt is £120,000 and the property sells for £100,000, you would still owe £20,000.
Repossession also has long-term consequences, including on your credit score. It will appear on your record for years and can make it extremely difficult to secure future borrowing. This can affect everything from applying for another mortgage to obtaining credit cards or even some rental agreements.
What are the alternatives to repossession?
Repossession is always considered a last resort. Before it reaches that stage, you may have several options available that could protect your home or at least allow you to achieve a better outcome.
Mortgage payment holiday or reduced payments
If your financial difficulties are temporary, some lenders will allow you to reduce or pause your mortgage payments for a short time. This could give you some time to recover and get back on track.
Extending the loan term
Another option is to ask your lender if they will extend the term of your mortgage. This spreads the debt over a longer period and reduces your monthly repayments, making them more manageable.
Voluntary sale of the property
One way to avoid repossession is to sell your house before the lender takes it back. By organising the sale yourself you might be able to get a higher price than a lender would through auction. This can help you clear the mortgage in full and avoid having a repossession recorded on your credit file.
What government support schemes are available?
There are government backed schemes designed to help homeowners in financial difficulty. Depending on your circumstances, you may be able to access support with mortgage payments or debt management. You can learn more through mygov.scot where schemes like Mortgage to Rent or Mortgage to Shared Equity are explained.
How we can help
As a property selling company, we regularly work with homeowners facing repossession. If you are in arrears and worried about losing your home, selling quickly may be the best option to protect your financial future.
We specialise in helping people achieve a fast sale, often within weeks, which can give you enough time to repay your mortgage before the court becomes involved. By selling before repossession takes place, you can potentially achieve a better price than a lender would through a forced sale.
