If you're struggling with your mortgage payments due to financial difficulties, you may be worrying about how long it can take for bailiffs to show up and seize your property. This guide will explain the repossession process, including how many missed payments it typically takes and what help is available if you're worried about missed payments.
How does the house repossession process work?
Knowing how the house repossession process works can help you know what to expect if you start missing mortgage payments. We've outlined the process from start to finish below:
Payment reminders
Your mortgage lender will contact you after one missed payment to try to come to an agreement with you over how to pay back your arrears. It's important to fully cooperate with your mortgage lender when they get in touch with you to prevent the situation from escalating.
Remember, missed payments will be added to your credit file for six years, which will harm your credit score. Extra interest and fees may also be charged for each consecutive missed payment.
Court action commences
If you don't respond to your mortgage lender, they may start legal action to repossess your home. This is a last resort, and most lenders would rather reach an agreement with you before going to court.
When they inform you of upcoming court action, they must include full details of the debt, including a list of all missed payments and the total level of debt owed. They must also give you at least 15 days' written notice before initiating court proceedings.
Possession hearing
Once a possession order has been confirmed, you will receive several letters in the post. Court papers will be sent at least four weeks before the date of your hearing.
It's crucial that you attend the hearing on the instructed date, and you must inform the court if there is a genuine reason you cannot attend (e.g. a sudden and serious illness). Failure to attend can lead to the court making an outright possession order against you, meaning you could lose your home.
Final decision
The court will make one of two decisions after the possession hearing: an outright order or a suspended order.
An outright order gives you a date by which you have to leave your home, which can be in just four weeks. A suspended order allows you to stay in your home, but you must follow rules set by the court and will have to pay something towards the debt on top of your normal mortgage payments.
Find out if your debts qualify
Check my eligibilityHow will missed mortgage payments affect my credit score?
Most mortgage lenders will report a missed mortgage payment to the main credit reference agencies (Experian, Equifax, and TransUnion) if you haven't resolved the problem after 30 days. Once a CRA has recorded the missed payment, it will remain on your credit file for six years.
The drop in your credit rating is usually the most severe immediately, but the impact tends to ease as time goes on - especially if you maintain payments on your other debts. The impact also varies based on other factors, such as how many missed payments you have on your credit record and your existing credit profile.
Having missed mortgage payments on your credit file will make it significantly more difficult to access other credit products, such as loans, credit cards, bank accounts, phone contracts, and remortgage deals. Even if you qualify, most lenders charge very high interest if you miss payments.
What is the Mortgage Charter?
The Mortgage Charter is an initiative that was set up between the government, regulators, and major lenders to protect homeowners who are struggling with their mortgage payments.
Under the scheme, homeowners can temporarily switch to interest-only payments (where you only pay the interest part of your usual monthly payment) or extend their mortgage term over a longer period to lower their monthly payments.
Lenders signed up to the initiative also agree not to force homeowners to leave their home unless in exceptional circumstances if it's been less than a year since their first missed payment. This means that most lenders will not evict you within a year of your first missed payment.
If your lender has signed up to the scheme and you want to remortgage to a different scheme, you won't need an affordability check.
To find out if you're covered by the Mortgage Charter, you can view a list of all participating lenders at GOV.UK. In the UK, most mortgage lenders (as much as 90%) signed the Mortgage Charter.
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How many missed mortgage payments before repossession (UK)?
In the UK, there is no fixed number of payments you need to miss before repossession action starts. However, repossession is always viewed as a last resort, and your lender will only try to repossess your home if they have failed to recover the debt through other collection methods.
Most lenders also follow the pre-action protocol, which lists certain steps they must follow before they take court action over unpaid mortgage debt. By doing this, it ensures that all alternative collection methods are tried before they resort to repossession.
Under the mortgage pre-action protocol, your lender must provide a detailed list of your mortgage arrears, recommend alternative payment options, and give you reasonable time to explore your options for dealing with your debt.
What happens if my home is repossessed and I still owe money towards the mortgage?
If your home is repossessed before your mortgage has been fully repaid (called having negative equity), you'll be left with something called a mortgage shortfall. This is essentially the remaining debt still left to pay after the property has been sold, which your lender will expect you to pay.
For example, if you still owe £200,000 on your mortgage and it only sells for £180,000, you'll likely have to pay £25,000 for the £20,000 mortgage shortfall and around £5,000 in sale and legal costs.
To pursue the debt, the lender will usually try to arrange a repayment plan with you, serve you with a County Court Judgment (CCJ), or take enforcement action if you don't pay.
I'm struggling with mortgage payments. What should I do?
If you're struggling with your mortgage payments, it's important to know that there is always help available. We've outlined the steps you should take to get help with your mortgage arrears below:
Work out what you can afford
The first thing you should do if you can't afford your monthly mortgage payments is to work out how much disposable income you have (money left after essential payments). This can help you create a budget and come to an agreement with your lender over what you can realistically afford.
To work out how much money you have coming in and out, you can use a budget calculator.
Talk to your lender
Once you have an idea of how much you can afford to pay towards your mortgage, you must act quickly and inform your lender as soon as possible.
Most banks and lenders will contact you if you miss a payment, but you should always reach out to them first if you know you're not going to make your payment in full or on time. Some of the options they may recommend include a temporary payment holiday or payment break, Breathing Space, switching to interest-only payments, or extending your mortgage term.
Check if you're eligible for SMI
Support for Mortgage Interest (SMI) is a government loan designed to help UK homeowners struggling with the interest on their mortgage and other secured loans for home improvements or repairs. It is only available to those claiming certain benefits and is typically paid directly to your lender. The maximum amount you'll receive is £200,000 if you're of working age or £100,000 if you receive Pension Credit.
To be eligible for SMI, you must receive Universal Credit, Pension Credit, Income Support, Income-based Jobseeker's Allowance (JSA), or Income-related Employment and Support Allowance (ESA).
Reach out for free debt advice
Whether you're worried about missing a payment or you're already in arrears, don't hesitate to reach out for independent financial advice from a qualified debt adviser. There are various charities and debt-help companies available to help you get a clear picture of your financial situation and discuss potential solutions so you can avoid repossession.
You can also reach out for free legal advice from Citizens' Advice. They deal with a variety of housing issues, from finding somewhere to live after your home has been repossessed to complaining about the way your mortgage company has treated you during possession proceedings. Under FCA rules, all lenders must treat customers in arrears fairly and with respect.
Consider an Assisted Voluntary Sale (AVS) scheme
An Assisted Voluntary Sale Scheme, or AVS, is an option some lenders offer that allows struggling homeowners to sell their property to clear their mortgage debt and avoid repossession. Under an AVS, lenders agree to suspend legal action while the property is marketed and may also agree to cover the cost of the sale up to a certain limit.
Some lenders might recommend AVS before you get into arrears if it's clear that the mortgage is no longer unsustainable.
See if you can pay the debt with your pension or insurance
In some cases, you may be able to pay your mortgage arrears with money from your pension or endowment policy, which is a type of life insurance.
However, doing so will end your life insurance plan, so it's crucial you seek expert legal advice before making any big financial decisions.
How much unsecured debt do you have?
Conclusion
Because a mortgage is a secured debt, you risk losing your home if you don't keep up with your agreed payments for a set period. Most lenders will start legal action and consider repossession after a few months if you've made no effort to resolve the problem.
Generally, lenders start to take legal action after three missed mortgage payments if you fail to come to an agreement over how to repay the debt.
However, no matter how many mortgage repayments you've missed, there is always help available. From proposing a new payment plan to getting a temporary payment break, reach out to your lender to discuss your options as soon as possible.
