Facing repossession: the options before it is too late
Repossession is a process with stages, and at almost every stage there is still an option that is better than the next one.
A lender can only repossess a property with a court order, and the process before that order is long enough to act in. Missed payments lead to arrears letters, then a formal notice, then court proceedings, then a hearing, then a possession order, and only then an eviction date.
The critical point is that a voluntary sale, even at a discount, almost always leaves the owner better off than a forced sale. A lender sells for what it can recover quickly, adds its own legal and estate agency costs, and the former owner has no control over the price. A sale you arrange, even under pressure, is usually at a better price.
What to do at each stage
The earlier the stage, the more options there are. Most lenders will discuss a payment arrangement before proceedings start, and many will capitalise arrears onto the loan where there is equity. Support for Mortgage Interest may be available if you are on certain benefits.
- Arrears stage: contact the lender, propose a payment plan, ask about capitalising arrears onto the term
- Before proceedings: take free advice from Citizens Advice, StepChange or Shelter
- After a claim is issued: respond to the court papers, and attend the hearing — orders are frequently suspended on agreed terms
- Possession order suspended: keep to the agreed payments, because a suspended order can be enforced if you do not
- Before eviction: this is the last point at which a sale can be arranged, and it requires the lender's cooperation
Selling to clear the mortgage
If there is equity in the property, selling it yourself and repaying the mortgage is usually the best outcome. The lender must provide a redemption statement showing the exact figure needed to settle, and it will normally agree to a sale at a reasonable price rather than proceed to possession, because possession is expensive for the lender too.
Tell the lender as soon as you decide to sell. A lender that knows a sale is progressing is far more likely to hold off enforcement than one that hears nothing. Ask for the enforcement to be suspended while the sale proceeds, and confirm the arrangement in writing.
Where there is no equity
If the mortgage and any secured charges exceed the property's value, a sale will not clear the debt, and the shortfall remains owed. In that situation, the lender may agree to a short sale — accepting the sale proceeds in full settlement — but it is not obliged to, and it will want evidence that the sale price is the best achievable.
A shortfall after repossession is still recoverable by the lender, and it can pursue the former owner for years. That is another reason a negotiated outcome before possession is preferable: it is usually possible to agree that the sale proceeds are accepted in full and final settlement of the secured debt.
Common questions
- Can I sell my house if I am behind on the mortgage?
- Yes, and it is usually the best option if there is equity. You need the lender's cooperation because it holds the charge, and it will require the sale proceeds to settle the mortgage. Tell the lender early, keep it informed, and ask it to suspend enforcement while the sale proceeds.
- What happens to my debt after repossession?
- If the property sells for less than the total secured debt, the shortfall remains owed and the lender can pursue you for it, sometimes for up to twelve years for the capital element. This is why a negotiated sale, with written agreement that the proceeds are accepted in full and final settlement, is usually worth pursuing hard before possession takes place.