How Many Months Mortgage Arrears Before Repossession?

Estimated reading time 9 minutes

Understanding mortgage arrears and the risk of repossession is essential for homeowners particularly in the current economic climate, where an increasing number of people, including landlords, are facing financial difficulties. Rising interest rates and living costs have significantly impacted homeowners and landlords, leading to a rise in mortgage possession claims and repossessions.

What are mortgage arrears?

Mortgage arrears occur when homeowners can’t meet their mortgage payment deadlines, potentially leading to the risk of repossession. You become in arrears as soon as you miss one payment. Your lender may not act immediately as many allow for a period of 15 days for you to make the missed payment. Should it go beyond this timeframe, the lender will contact you for an explanation.

What is repossession?

Repossession, in the context of homeownership and mortgages, refers to a legal process in which a mortgage lender takes ownership of a property due to the borrower’s failure to keep up with mortgage payments. This typically occurs after the homeowner falls into mortgage arrears. The actual timeline can vary based on individual lender policies and circumstances.

What are the steps from arrears to repossession?

It usually involves several steps to move from being in mortgage arrears to having your home repossessed. The typical process works as shown below:

  1. Notification of Arrears: Initially, the lender will notify the homeowner that they are behind on their payments and seek to recover the owed amount.
  2. Communication and Repayment Plans: Lenders often attempt to work with the homeowner to create a repayment plan to bring the mortgage account back into good standing.
  3. Legal Action: If these efforts fail, the lender may begin legal proceedings to repossess the property. This includes obtaining a court order.
  4. Court Proceedings: The homeowner can defend against repossession in court, but if the court rules in favour of the lender, a repossession order will be granted.
  5. Eviction and Sale: Once a repossession order is granted, the homeowner will be required to vacate the property, after which the lender can sell it to recover the unpaid mortgage amount.

It is important to note that the earlier you speak to your lender, the sooner you can find a solution. By doing this, you reduce the probability of repossession. Many lenders prefer to work out alternative arrangements with borrowers as repossession is typically a last resort and can be a lengthy and costly process.

There was a noticeable increase in mortgage repossessions in the first quarter of 2023, driven by cost-of-living pressures and higher interest rates.  More than 1,000 homes were repossessed, an increase of 24% from the same quarter last year, and 76,630 homeowner mortgages were in arrears. The highest rate of mortgage possession claims were Kensington and Chelsea followed by Newham and Hackney.

For landlords, it is the changes in regulations as well as the rising interest rates which have contributed to their uncertainty. Boroughs with the highest rate of private landlord possession claims were Harlow, Basildon and Barking and Dagenham and the highest number of landlord repossessions were in Barking and Dagenham, Havering and Tendering.

The ongoing financial challenges that homeowners faced throughout 2023 propelled the government to introduce the Mortgage Charter to help slow down the number of repossessions and assist those who faced difficulty paying their mortgages.

What is the 2023 mortgage charter?

The UK’s 2023 mortgage charter introduced measures to support homeowners facing financial challenges. It has been endorsed by 90% of the mortgage market lenders and includes:

  • Protection from forced removal: Borrowers cannot be forcibly removed from their homes in less than one year from their first missed payment, barring exceptional circumstances.
  • Support for fixed-rate deals: Those approaching the end of a fixed-rate deal can lock in a new deal up to six months in advance.
  • Interest-only payment option: Borrowers up-to-date with their mortgage payments can opt to make interest-only payments for six months to regain financial stability.
  • Mortgage term extension: Customers can extend their mortgage term, reducing their monthly payments, with an option to revert to the original term within six months.
  • No impact on credit score: These options won’t impact a borrower’s credit score, provided they haven’t missed any mortgage repayments.
  • Ongoing lender support: Even if you have fallen behind with payments, continuous engagement with your lender for support is crucial.

10 common questions about mortgage arrears

  1. What should I do as soon as I realise, I might fall into mortgage arrears?

Contact your lender as soon as possible to discuss your situation and explore options. Early communication can enable you to find a solution like modified payment plans.

  • How many months in arrears before a lender can initiate repossession?

Typically, repossession starts after a few months of continuous arrears, but this varies by lender. Lenders only action this as a last resort they are often willing to consider alternative solutions first.

  • Can I sell my house if I am in mortgage arrears?

Yes, selling your house with mortgage arrears can be an effective way to clear the debt and avoid repossession. If your property is in negative equity, it’s important to negotiate with your lender or find ways to cover the shortfall. Selling to cash buyers like Gaffsy can expedite the process, offering quick, fee-free solutions that are ideal in urgent situations.

  • Can I rent out my property to cover mortgage payments if I’m in arrears?

Yes, you can. Renting out your property and renting somewhere more affordable is feasible, but first, you must obtain permission from your lender and potentially switch to a buy-to-let mortgage to avoid breaching your residential mortgage terms. Or you could take in a lodger to provide an additional income stream, making mortgage payments more manageable. Do consult with your mortgage lender and understand any legal implications before proceeding.

  • Are there any government schemes available to help with mortgage arrears?

Yes, there are. It is always worth checking for government assistance programs, like the Support for Mortgage Interest scheme which is a scheme designed to help homeowners with interest payments on their mortgage or loans taken out for certain repairs and improvements to the home. If you are in debt to a creditor then you may be eligible for the standard Breathing Space scheme. Do seek advice from a qualified adviser to ensure you understand the implications and the eligibility criteria.

  • Are there any free debt advice services I can turn to for help with mortgage arrears?

Yes, free debt advice services like Citizens Advice, National Debtline, and Shelter can offer guidance and support in managing mortgage arrears and negotiating with lenders.

  • What are the consequences of having mortgage arrears on my credit score?

Mortgage arrears can negatively impact your credit score, affecting your ability to obtain credit in the future

  • Is it possible to renegotiate the terms of my mortgage if I’m facing financial hardship?

Yes, many lenders offer options to renegotiate mortgage terms under financial hardship. The sooner you speak to your lender the sooner they can help, especially if you contact them prior to falling into arrears.

  • What should I do if I receive a repossession notice from my lender?

Seek legal advice and continue communicating with your lender to find a solution. Citizens Advice, National Debtline, and Shelter can also offer you advice. Check out our guide how to stop house repossession.

  1. What happens if I can’t reach an agreement with my lender about my mortgage arrears?

If an agreement isn’t reached, repossession might be the last resort. In the UK, lenders must adhere to a ‘pre-action protocol’ before initiating repossession. This involves informing borrowers of their arrears and considering requests for alternative repayment plans. Repossession is generally a last resort.

Preventive measures to avoid repossession

There are some measures you can take to avoid repossession of your home. This could include:

Proactive financial management

Speak to your Lender: If you speak to your lender in time, you may be able to negotiate a mortgage holiday, refinancing options, or leveraging the provisions under the 2023 mortgage charter. These alternatives offer temporary relief and assist in organizing your finances to manage mortgage obligations better.

Set a realistic budget: Prioritising mortgage payments, creating a realistic budget, and communicating early with lenders if facing financial trouble is crucial. Consulting financial advisors and exploring resources like government assistance programs are also advisable.

Selling Your home

Downsizing or Moving to a More Affordable Location: For homeowners anticipating financial difficulties or already in arrears, selling the property before the situation worsens can be a proactive step. Downsizing or moving to a more affordable area, where you can get similar space for a lower price, might be a sensible choice. This approach can help in reducing the mortgage burden, potentially freeing up resources for other financial obligations.

Selling Even in Arrears: If you are already in arrears but not in negative equity (where your property’s value is more than the mortgage owed), you can still sell your home. Selling the property can help clear the mortgage debt and arrears, preventing the risk of repossession.

Why sell to a cash house buyer if you are in mortgage arrears?

Contacting a genuine cash house buyer like Gaffsy can be advantageous, particularly for those looking for a quick sale. Cash buyers can speed up the selling process as they do not need lenders to fund the purchase because they use their own funds. This means you can get the fast house sale you require.

This allows a homeowner in financial difficulty to resolve their situation faster than if selling through an estate agent.  We buy any house within 7 days so why not contact us today for a no obligation free cash offer?

This option is especially beneficial if you’re looking to avoid falling into further arrears or facing imminent repossession. Cash buyers purchase homes ‘as is,’ so you can avoid time and expense that otherwise would have had to be spent preparing your property for a traditional sale.  Additionally, selling to a cash buyer eliminates the uncertainties of a property chain, making the transaction smoother and faster.

Selling your home can be a viable strategy to prevent falling into mortgage arrears or to manage existing arrears effectively. Whether it’s downsizing, relocating, or selling to a cash buyer like Gaffsy, these options offer homeowners a way to adjust their financial situation more suitably to their current needs. By taking action before arrears escalate or opting for a quick sale solution, homeowners can navigate their way out of financial difficulties, preserving their credit standing and moving towards a more sustainable financial future.

If you are a homeowner facing financial difficulties, you should explore all available options, seek advice, and act promptly to manage your mortgage commitments effectively.

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