According to the Bank of England, in the first three months of 2023, there was a 9.5% increase in homeowners falling behind on their mortgage payments. This adds up to £14.9bn worth of loans with arrears. Many of these homeowners are at risk of repossession. Fortunately, some things can be done to stop it. If you’re worried about repossession in Sheffield, consider the following options to avoid a potential nightmare situation for you and your family.
How do I avoid repossession of my house?
Repossession occurs when a homeowner has repeatedly failed to make mortgage payments and gone into arrears. It’s usually a last resort for lenders and generally not something they want to do as it costs time and money.
If you’ve missed one payment, don’t panic, most lenders offer a 15-day grace period. If you make the payment within the grace period, it is unlikely to affect your credit score or incur a late fee.
That said, it’s so important to contact your lender at the first sign you’re going to struggle to keep up with your mortgage payments. Be honest and transparent about your situation. Lenders would much rather you communicate with them than continue to miss payments and force their hand to begin repossessing your home. Generally, this will happen after three missed payments.
Here in the UK, mortgage lenders are regulated by the Financial Conduct Authority (FCA). The FCA is well aware of the financial strain many people are experiencing due to the ongoing cost of living crisis. That’s why they expect lenders to provide forbearance to borrowers facing financial difficulty.
Whether you’re currently in arrears or foresee future trouble with paying your mortgage, your lender will offer support. We’ve compiled some examples of help they can give you below.
But before agreeing to any repayment plan with your lender, it’s crucial to budget. You can find many free budget planning tools online. If you’re already in arrears, it’s wise to begin talking to a debt advisor in Sheffield. You’ll get guidance on what to do, and it shows your lender you’re committed to dealing with the debt.
Payment holiday
Your lender may offer you a payment holiday, effectively pausing any mortgage payments for a specific amount of time. It can be really helpful if you have recently become unemployed. Do consider that interest will still accrue during the payment holiday and this will increase the overall cost of your mortgage. It may also impact your credit score. But if this means keeping your home, it’s an option that may suit you.
Lengthen the terms of your mortgage
By offering to extend the terms of your mortgage, your lender will give you the chance to make lower payments over a longer period of time. It will make your mortgage more affordable and free up extra funds. It’s not without some cons, though. Lengthening your mortgage terms will make building equity slower and increase the time you spend in debt.
Switching to an interest-only mortgage
A short-term solution is switching to an interest-only mortgage. You’ll be paying a smaller amount each month but bear in mind that you will still need to repay the loan at some stage.
Reducing your payments
Some lenders will offer to temporarily lower your payments for a limited amount of time. This can be a massive help to you in a time of financial difficulty. Of course, your regular rate will resume eventually, so be prepared to keep paying it after the agreed reduction window.
Government support
Plenty of government support is available for people struggling to pay their mortgages. Your lender may signpost you to the Support for Mortgage Interest (SMI) scheme, which helps you to pay the interest on your mortgage. The Debt Respite Scheme (Breathing Space) is also available for people with mortgage debt.
Remortgaging your house
Another option your lender may suggest is taking out a new mortgage with them or moving your mortgage to another lender. It’s best to talk to a mortgage adviser in Sheffield to find out if it’s a good choice for you.
How to stop repossession if you can’t agree on a solution with your lender
The FCA sets out rules for the way lenders must treat their customers. Before seeking a court order to begin repossession, the lender must consider all your attempts to deal with your arrears. If you’re unable to agree on a repayment plan with your lender, here are some things you can consider doing.
Renting out your home
This is an outside-the-box way to keep your house in Sheffield and pay your arrears. If you’re able to move in with family or friends, you can find tenants to live in your house instead. The money you make from letting should be enough to cover your mortgage and contribute to paying back what you owe. When your finances are in better shape, you can move back into the property yourself.
Not everyone is eligible to become a landlord, though. Double-check the terms of your mortgage to see if you can let all or part of your property as some mortgages have restrictions on this. It’s also important to find reliable tenants as missed rent payments could cause you problems.
Voluntarily selling your house
If you decide to sell your home, the lender is required by the FCA to grant you adequate time to do so. It’s never pleasant having to sell your home under these circumstances. But ultimately, selling your house is far better than defaulting on the mortgage and risking repossession.
Carefully consider how you want to sell your home. The longer it takes, the more interest you will have to pay on your mortgage, and the more arrears can pile up, which will impact your credit score. Sometimes selling on the open market can take a lot of time. Especially if your house in Sheffield isn’t in the best condition or is in an undesirable location. Sadly, your lender may not be willing to wait if you’re not getting much interest from potential buyers. They could then start the repossession process. If the lender is successful, you will be liable to pay the court fees and will be evicted before the house is sold.
That’s why it’s worth exploring faster ways of selling the property. Using an auction is one such way. You can also work with a reputable cash house buyer to get a fast sale.
With We Buy Any Home, you can sell your house in Sheffield exactly as it is in as little as 7 days. There are no fees involved whatsoever, so you don’t have to worry about paying solicitors or estate agents. We cover everything.
During the process, you’ll be guided by our experienced team who will take all the stress off your hands. As you’ll be selling fast, we can’t offer full market value, but we aim for 80-90%. With the amount we offer, you should be able to pay the lender what you owe whilst keeping some funds for yourself.
When is it too late to stop repossession in Sheffield?
It’s never too late to stop your house from being repossessed. But you need to take action. Even if it’s down to the wire and your lender has a court order, We Buy Any Home in Sheffield can step in and buy your property.
We understand how traumatic it can be to face eviction. We don’t want that for you, so we will gladly let you stay in the property for free even after we’ve purchased it. When you’re on the phone with your dedicated We Buy Any Home agent, please discuss this with them, and they will find out how long we can keep you in the property. You may also be able to rent the property from us in the longer term.
Repossession has serious consequences. You should do everything in your power to prevent it. The Ministry of Justice said 733 homes were repossessed between October and December 2022, up 134% from the same period in 2021. All those people will have a hard time getting another mortgage due to low credit scores. Don’t be one of the many people who will have their home repossessed in Sheffield this year. Reach out to us today to learn more about how our cash house buyers can help you.
