What really happens if I can't keep up mortgage repayments?
If you're struggling to keep up your mortgage payments, you may be worried that your home will be possessed and that you may have to hand over your keys. However, the reality is that there are lots of steps you can take to stay in your home if you're struggling to pay your mortgage.
Speak to your lender
If you are finding it hard to maintain your mortgage repayments, your first step should always be to speak to your lender. From April 2015 there has been a new protocol which sets out the procedures that you and your lender must follow before your lender heads to court.
You have to:
- stay in touch with your lender
- act fairly and reasonably with your lender
- make an effort to arrange payment of your arrears
Your lender must:
- let you know what the total amount of your arrears is
- tell you how much is still left to pay on your mortgage and whether any interest or charges have been/will be added
- discuss with you the cause of the arrears, your financial circumstances and proposals for repayment
- advise you to make contact with the local housing authority and, where appropriate, refer you to an independent debt advice service
- allow you a reasonable period of time to consider a proposal for payment that they make
Your lender must consider a reasonable request from you to change when or how you pay your mortgage. If you make an offer to repay the arrears they must get back to you quickly with an answer and, if they refuse your offer, they must let you know in writing within 10 working days.
Your lender should not start court action while you are trying to come to an agreement.
What happens when your lender starts court action
If you cannot come to an agreement, your lender may begin court action. If they do begin court action you will receive a 'claim for possession of property' from the county court. This will give you details of your lender's case and the court hearing.
As well as the 'claim for possession' you should also receive a notice from your lender saying that court action has begun. The notice will be addressed to 'the tenant or occupiers'. The 'particulars of claim' will tell you how much you owe, how much you should be paying and what steps your lender has taken to collect the arrears.
You should receive between three and eight weeks notice of the hearing and so you still have time to try to come to an agreement with your lender.
At the court hearing, the judge will generally make a decision on the day, unless there are any complex issues of law to take into account. The decision will normally be:
- Adjourn the case - this is where the case is put on hold. The judge may require more information or to allow you to make a complaint to the Financial Ombudsman Service
- Dismiss the case - if the judge is not satisfied that your lender has the right to take possession of your property they can dismiss the case
- Make a 'suspended possession order' - here, you can stay in your home as long as you keep to an agreement to pay off the arrears at a fixed amount on top of your normal mortgage payment. If you don't keep to this arrangement, your lender can apply to the court to evict you
- Make an 'outright possession order' - here, your lender has been given permission to take possession of your property. You will have to vacate the house by the date given in the order.