Avoid Repossession of your House

By: Sean Wheller

Under the terms and conditions of all bank mortgage contracts it states that a home may be repossessed if repayments are not kept up-to-date. This means that the lender has the right to issue repossession proceedings if mortgage payments are not made as required. Lenders take different actions at different stages, because of this the period of arrears permitted varies. Lenders will most certainly contact you in writing within 60-days and will, on average, take action within three months if no attempt to make payment is made.

People fall behind with their mortgage payments for a variety of reasons, redundancy, divorce or separation, bereavement and ill health are just a few. Lenders know and understand this from the onset when granting a mortgage. They do not want to be in a position where they must repossess a home, but they also cannot allow late payment and not take action. This would send the wrong signal to all mortgage holders and foster a culture of late or non-payment. If this were to happen the lender could find itself losing billions in revenue.

Since bankers are aware of the risk that a person may default on their loan, they are sensitive and understanding of the problem. They also know that it is in their interest to help a mortgage holder find alternatives when they have problems. Within reason, lenders usually have a predetermined list of products that can be applied in problem cases. However, most mortgage holders are either, not aware of this or forget when faced with an inability to make payment on their mortgage.

It is common when speaking to home owners that are in the process or have had their home repossessed, to find that they simply did nothing to try and get themselves out of the trouble they find themselves in. They seem to be so struck by fear that they are paralysed into doing nothing. Letters are ignored and calls avoided, almost as though they are wishing the problem will somehow "vanish".

This is the biggest mistake anyone can make. In fact it is better to make contact with a lender well before getting into this situation. The best action is to contact the lender prior the date on which the payment is due. Have a meeting, explain your predicament to them and see if there is any way they can help before taking any other actions.

The solutions are many and will depend on your particular situation. Some lenders may even give a "payment holiday" where they will suspend payments for a set period whilst the customer sorts out the underlying reasons for not being able to meet their mortgage payments. Again, how they will act depends largely on how early you make contact and the circumstances of each case. It is highly unlikely that they will immediately start repossession action. One this is for sure, ignoring your lenders letters and calls is a sure way to set them on the course to apply for the repossession. So speak to them first and do it early.

If you have an accountant or a financial adviser, it is highly recommended that you seek their advice also. They may be able to suggest solutions or put you in touch with someone who can give you free financial advice to help your situation. A good financial adviser will be able to provide you with the steps you need to ease your financial predicament as quickly as possible. Please note that when we say "financial adviser", we do not mean an insurance sales person.

Getting into financial difficulty is a source of embarrassment for many people. Don't be shy, it is better to get it out into the open early any feelings you may have at this stage will be nothing in comparison to those you will have if your lender repossesses your property.

Sometimes people are just plain fed up. Not being able to make a mortgage repayment is the last in a long line of events. It is common for them to think that the repossession of their home will end all money worries. This is generally not the case. Repossession of a home usually happens after a person is finally not able to pay anything and may possibly have a long line of debts with many creditors. As soon as the home is repossessed all creditors will come knocking. The pressure will mount quickly.

Many people mistakenly think that if the bank repossessed a home that they will get some money from the bank with which to cover all other debts. This is not true, generally a lender is not interested in owning the property or the fact that the property is possibly worth more than the mortgage over it. They just want to try to recover the money outstanding on the loan account, nothing more. So if a home is worth a million and the outstanding amount is 100,000, they will quickly sell the property for 100,000 at auction.

Remember, the home must first be attached by the Sheriff and sold at the Sheriffs'' auction before it will be in possession of the lender. The lender will in almost all cases, be bidding at this auction. As soon as the auctioneers price goes above the amount outstanding, the bank representative will stop bidding and possibly leave the auction. This is because the person who wins the auction is paying a price higher than the outstanding amount which must be paid to the bank. If the property sells for more than this, then the Sheriff is responsible for paying all creditors before paying the seller. In most of these cases, the property rarely sells for much more than the bank is owed and the remaining balance is mostly, if not all, consumed by creditors.

Another problem resulting from repossession is the effect it has a persons future situation for years down the line. A person who has undergone repossession will most definitely find it very hard to arrange any credit for a very long time. Some people never recover, and if credit is provided it is generally at a very expensive premium.

So first thing to do is speak to your lender, then get advice from an accountant and a financial adviser. If this is not helping, then the next solution is to speak to a property investor that has the experience with which to buy property under such circumstances. Often they will buy your property for less than current market value but more than the outstanding amount to the lender, but they can normally resolve the situating very quickly as they understand how the banks operate and are knowledgeable in such matters.

Within reason, Property Investors, will often offer you enough to cover existing debts and may even allow you to remain in your house after they have bought the property as a tenant. Some will also pay your legal fees or let you stay rent free for a period or arrange a combination package that will give time for you to recuperate. Not having to relocate can be a major bonus as you will not have to find a new place to live, pay rental deposit, pay for removal or storage of belongings. If one has children at school it will also help to leave some stability in their lives and the life of the family during this very difficult time.

In conclusion, it is always better to approach a lender ahead of time and try to solve problems before they happen. It is also highly recommended that a person with financial problems speak to an accountant or financial adviser. Professional advise, combined with assistance from the bank will demonstrate willingness to fix a potential problem. Lastly, if all else fails, speak to a property investor that has experience in buying in such circumstances. They may not pay what you would like, but they may provide a better alternate to repossession and the aftermath that goes with it.

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