Repossession of a home you own 

Pre-action protocol

There are certain steps your lender must take before it takes action to repossess your home, which are set out in a ‘pre-action protocol’. This applies to most residential mortgages. Proof that the correct procedures have been followed will need to be produced at the court hearing. 

Your lender has to:

• Let you know what you owe and any charges due on your debt.
• Consider any reasonable request to alter the way you pay your mortgage.
• Respond to any offer of payment you make.
• Provide reasons for rejecting your offer within 10 working days.

If you come to a repayment agreement with your lender and you don’t keep to it, the lender needs to warn you in writing that it plans to commence court action. It has to send you a letter giving you 15 working days’ notice of the action it plans to take.

Deferring repossession

Your lender may put off starting an action for repossession in a variety of situations including if you:

Have a mortgage payment protection policy

This is insurance which covers your mortgage repayments – or a percentage of them - if you lose your job or fall ill. You will need to show your lender that the insurer will pay out and that the amount available under the policy is enough to cover the mortgage or, if it’s not, that you can make up the difference.

Complain to your lender to the Financial Ombudsman Service (FOS)

If you think your lender has treated you unfairly you can make a complaint to the FOS. This may prompt the lender to put the repossession action on hold while the FOS is dealing with a complaint. The lender is not obliged to postpone the action, however, although it must give you five working days’ notice of its plans.

Taking action to sell your home

If you are taking reasonable steps to sell your home, your lender might agree to postpone its repossession action. You will need to keep your lender fully informed of the progress you are making with the sale. If they reject your offer to sell, it must give you reasons at least five working days before starting any action.

Participate in a sale and rent scheme

Some companies will buy your home off you and rent it back to you – it will help pay off your debts but you won’t necessarily get the price you would ordinarily get for your home or have security of tenure. You may also face eviction anyway if the company that bought your home gets into financial problems and can’t pay the mortgage. 

Avoiding repossession 

Debt advisors and negotiating with your lender

If you are having money problems, paying your mortgage should be your first priority. If you can’t keep up with the payments, talk to your lender early on. Don’t leave your lender in the dark or repossession proceedings could be initiated sooner rather than later.

Before you do talk to your lender though, consult a debt advisor who can talk you through the best way of approaching your lender. They will also advise you on any benefits you might be entitled to and put together a plan for managing your debt.

If you fall behind on your mortgage payments, your lender will write to you setting out how much you owe, how much is left on the mortgage and how much interest and charges you are notching up through non-payment.

Your lender may agree to change the term of your loan; accept smaller payments from you for a set period or add any repayment debt to the amount you have borrowed. It’s likely that any change to your mortgage will result in penalties or charges though. 

Homeowner Mortgage Support Scheme

A new scheme set to be introduced in 2009, this helps home-owners who have lost their job or had to take a drop in wages. It allows lenders to cut your mortgage payments while you are in financial difficulty and then recoup the difference later when you are back on your feet. The government guarantees the lender against a proportion of any loss incurred on the deferred interest payments in case you default. To qualify, you will:

• Have seen you income fall so paying the mortgage is hard but your earnings are expected to rise again at some point.
• Have been talking to your lender and making some regular payments.
• Have a mortgage of up to £400,000 and savings below £16,000.
• Be an owner-occupier - second homes or buy-to-let properties are not eligible
• Not be getting mortgage rescue assistance.
• Be able to pay a set monthly amount on an ongoing basis.
• Have taken financial advice from someone other than their lender to determine your eligibility for the scheme.
• Have fallen into arrears for some of months during which the lender has exercised forbearance.

Mortgage Rescue Scheme (MRS)

You may be eligible for help through the MRS if you are facing repossession and homelessness. The council will arrange for you to meet advisers who will draw up a plan to manage your debt. To be eligible your household must include someone in 'priority need' including a pregnant woman; someone with dependent children; or someone vulnerable because of old age or a physical/ mental impairment. The following also needs to be met:

• All the home-owners must agree to be considered for the scheme.
• You must have had debt counselling and agreed repayment plans.
• You should have discussed all repayment options with your lender.
• Your household must earn less than £60,000 a year
• The value of your home should not be higher than set regional levels.
• You must have a good reason for needing to stay in your home and it must be suitable for your needs.
• You can’t own a second home.
• The value of the part of your home you own must be enough to pay off any outstanding debts.

Housing Possession Court Duty scheme

If you’re facing repossession or eviction, you can get free legal advice and representation in court under this scheme whatever your financial situation – as long as you have a hearing listed the same day. You can get help if you’re a mortgagee (even if you have a second mortgage) for possession hearings and warrant applications. The adviser will represent you at the hearing and help with any follow up action. They can also help negotiate a debt payment plan with your lender.