If you’re struggling to keep up with your mortgage payments, you’re not alone. Many homeowners face financial difficulties at some point in their lives. Whether it’s due to job loss, illness, or simply living beyond your means, missing mortgage payments can lead to serious consequences, including the threat of repossession. But how many months of mortgage arrears does it take before repossession happens? And what can you do to avoid it?
In this article, we’ll explain everything you need to know about the repossession process, how long it typically takes, and what you can do to prevent it. Let’s dive in.
What Are Mortgage Arrears?
Mortgage arrears occur when you fail to make your mortgage payment by the due date. Typically, your payment is considered overdue the day after the due date. However, many lenders offer a grace period of up to 15 days before they contact you about the missed payment. During this time, your loan isn’t technically in arrears, but after that grace period, the lender can begin to take action.
If you continue missing payments, your mortgage enters a period of arrears, and the longer the arrears last, the more likely it is that repossession proceedings could begin. But before this happens, lenders will typically try to work with you to resolve the issue, as repossession is a last resort.
How Many Months of Arrears Before Repossession?
In the UK, the process for repossession generally begins after three to six months of missed payments. However, this can vary depending on the lender and your individual situation.
Three Months of Missed Payments
Typically, after three months of missed payments, a lender may start considering legal action. However, this doesn’t mean repossession is automatic at the three-month mark. Many lenders will try to work with you and offer options to avoid repossession.
At this stage, your lender will likely send you formal notices, explaining your missed payments and warning you about the possibility of repossession.
Six Months of Missed Payments
If your arrears reach six months, the lender is much more likely to take serious legal action. After this period, the lender can apply for a possession order from the court, which is a formal request for the court to approve the repossession.
However, even at this point, there are still opportunities for you to negotiate with the lender and avoid repossession. Many lenders will give you the chance to make a payment arrangement, catch up on missed payments, or even apply for a payment holiday if you’re facing financial difficulties.
Beyond Six Months
If you haven’t made any payments or reached an agreement with the lender after six months, repossession is highly likely. The lender will apply to the court for a possession order, which allows them to take possession of your home. However, repossession can still be delayed if you manage to negotiate with your lender or make a lump sum payment.
The Repossession Process
While the process for repossession can vary depending on the lender and the specifics of your situation, there are certain steps that are generally followed.
Step 1: Initial Missed Payments
When you first miss a mortgage payment, your lender will contact you, usually by letter or phone, to remind you about the missed payment. This is often just a warning, and if you make the payment within a few days, you may avoid any further action.
Step 2: Formal Notices and Warnings
If you miss a few more payments, the lender will begin to issue formal notices, which might include:
- A letter explaining your arrears and the potential consequences.
- A demand for payment, specifying how much you owe and when it must be paid.
- A notice of intention to take legal action if you don’t reach an agreement or make payment arrangements.
At this stage, the lender may offer some flexibility, such as rescheduling your payments, extending your repayment term, or offering a mortgage holiday if you’re facing temporary financial difficulties.
Step 3: Legal Proceedings
If no agreement is reached and you continue to miss payments, your lender may apply to the court for a possession order. This will involve legal proceedings, and the lender will need to show that they have made reasonable attempts to work with you and that repossession is necessary.
At this stage, you will receive a court notice with details of the hearing, where you can attend and explain your situation to the judge. In some cases, you may be granted additional time to pay the arrears or even a chance to sell the property before repossession occurs.
Step 4: Court Hearing and Possession Order
If the court rules in favour of the lender, a possession order will be granted. This order will give you a specific period (usually 28 days) to vacate the property. If you don’t leave by this deadline, bailiffs may be sent to evict you.
It’s important to note that if you act early and show that you’re taking steps to resolve the situation, you may be able to avoid the repossession process entirely.
Step 5: Eviction
Once the repossession order is granted and you’ve been given time to leave, the lender will take possession of your home. In some cases, the lender will sell the property to recover the debt. This is often done quickly and may result in the property being sold at a lower price than it would have on the open market.
Can Repossession Be Delayed or Stopped?
If you are facing repossession, it’s not always too late to act. Here are some options you may want to explore:
Negotiate with Your Lender
It’s always a good idea to speak with your lender as soon as you realise you’re struggling to make payments. Most lenders would rather work with you to avoid repossession. You may be able to:
- Reschedule your payments.
- Apply for a payment holiday.
- Make a part-payment and catch up over time.
Seek Financial Advice
If you’re unsure what options are available to you, consider seeking independent financial advice. Services such as Citizens Advice, National Debtline, and Shelter can provide free, impartial advice on managing your debts and avoiding repossession.
Apply for Government Assistance
In some cases, the government offers support for homeowners facing financial hardship. There are schemes available that can help you with your mortgage payments, especially if you’re facing temporary difficulties like illness, job loss, or a reduction in income.
Sell Your Property
If you’re unable to catch up with your mortgage payments and repossession seems imminent, selling your property may be an option. If you sell the property before repossession occurs, you can use the proceeds to pay off your mortgage and avoid the negative impacts of repossession, such as damage to your credit score.
Apply for Bankruptcy or Debt Relief Orders
If you’re struggling with severe financial difficulties, it may be worth considering bankruptcy or a Debt Relief Order (DRO). These options can provide legal protection from creditors, including your mortgage lender, and allow you to restructure your debt in a way that is more manageable.
What to Do If Your Home Is Repossessed?
If your home is repossessed, there are still steps you can take to protect your future.
- Remove Your Belongings: You will need to move out of your property once it is repossessed. You should aim to remove all personal belongings before the bailiffs arrive.
- Understand Your Rights: After repossession, you may still owe money to your lender if the sale of your home doesn’t cover the mortgage. This is known as a “shortfall.” The lender can pursue you for the shortfall, which could involve legal action or garnishing your wages.
- Focus on Rebuilding Your Credit: Repossession can severely damage your credit score, making it harder to get a mortgage or other types of credit in the future. Start rebuilding your credit as soon as possible by making timely payments on any other debts you have.
Conclusion
Mortgage arrears can be stressful, but it’s important to understand that repossession is not inevitable after a few missed payments. The process typically takes three to six months, depending on the lender and the specific circumstances. The earlier you take action, the more options you will have to resolve the situation and avoid repossession.
If you’re struggling with mortgage payments, don’t wait until you’re facing repossession. Speak with your lender, seek professional advice, and explore all available options to get back on track with your payments. There is help available, and acting early can make all the difference.
