Nobody takes out a mortgage with the anticipation or expectation that they will miss payments or even default on their loan. This is why so many homeowners don’t know much about mortgage defaults or repossessions.
We provide an overview of mortgage default options and answer common questions. If you’re struggling to pay your mortgage, don’t bury your head in the sand and read this.
What is mortgage default?
A mortgage default occurs when the borrower fails to make several mortgage repayments. This isn’t the same as missing a single repayment. The lender will notify the borrower of mortgage default for not abiding by the credit agreement terms.
What is a repossession?
Repossession is the legal process a lender uses to seize back possession of the property and sell it when the borrower has defaulted on their mortgage, and no other resolution can be found. The lender sells the property to recover the debt owed on the mortgage. If there is still a debt outstanding (shortfall), the lender can take further action to get this money back as well.
What to do if you’re facing mortgage default?
If you’re struggling to keep up with your mortgage repayments, you should communicate this with your lender. They can work with you to help find solutions and prevent the situation from escalating. You can also seek debt help and support from UK debt charities, such as StepChange and National Debtline.
Can you avoid repossession?
Yes – just because you have missed mortgage repayments doesn’t mean the lender will use repossession. However, this will depend on the specifics of your circumstances and situation. You can increase your chances of avoiding repossession by communicating with your lender, speaking with financial advisers and/or getting support from a debt charity.
Can I reclaim my home after a repossession?
The repossession process includes the lender seizing possession of the property. Even at this escalated stage, it is still possible to negotiate with your lender and prevent the property being sold. You won’t be able to reclaim the property if it is eventually sold as part of repossession.
Is there any government assistance for those facing mortgage defaults?
Government support for people struggling to pay their mortgages is subject to change. It is best to research what help is available in real-time. Therefore, for more information on this subject it’s best to visit the government’s website. At the time of writing, there are current measures in place to help struggling borrowers, including a one-year delay before any lender will initiate repossession proceedings.
How long does a property repossession stay on a credit report?
Repossession of property remains on your credit report for seven years from the date of the first missed mortgage payment that led to the mortgage default and then the repossession. Having this record on your credit file will make it more difficult to access credit during those seven years.
How long until repossession takes place?
The repossession timeline can vary significantly between cases. In normal circumstances, some homeowners could have their property repossessed in as little as six weeks, although it usually takes a lot longer, stretching over many months. The current government intervention means a repossession cannot begin for one year – but this is subject to change.
Can I refinance my mortgage if I have defaults in my payment history?
It’s possible to remortgage when you have missed mortgage repayments with your current lender or even have a mortgage default. Naturally, the latter is more difficult than the former, but both situations can be complex. It is best discussed during a professional mortgage advice consultation.
Defaults
Many people who default on their mortgage get into their situation through no fault of their own. This is why we provide non-judgmental and empathetic mortgage advice services to help homeowners struggling to repay. Speak with us today to increase your chances of avoiding mortgage repossession.
