Guarding against repossession

As the economy slowly pulls itself out of recession, its symptoms will be felt long after the economy becomes buoyant.

In particular, leading economists all agree unemployment will continue to rise, notwithstanding any improvements in the economy. Consequently, the level and rate of home repossessions will continue albeit at a lower rate for some time to come.

However, there are some simple and practical steps the home owner can take in order to deal with any problems concerning repossession of their home, in particular:-

1. Be proactive rather than reactive in assessing your finances and your ability to pay your mortgage. It is important to have a realistic assessment of your current financial position and your ability to pay your mortgage and speak to your lender immediately should you anticipate not being in a position to pay your mortgage in the future;

2. If the repayment method for your mortgage is based on” interest and capital”, you may ask your lender to switch your repayment method to that of interest only. This could in theory save your hundreds of pounds in terms of annual mortgage payments;

3. If the term of your mortgage is considerably shorter than the standard 20-25 years, you may ask your lender to extend the term of your mortgage. The result of this is that the monthly mortgage payment may be considerably reduced;

4. Despite the number of mortgages being drastically reduced by most lenders, there still are numerous deals in the market place - a reputable mortgage broker can scour the market and perhaps find you a better mortgage deal than the one you are currently on;

5. Most high street banks adhere to the new banking protocol under which they must provide borrowers with a period of grace (three months) before commencing any repossession proceedings against your property. Please ensure you remind any over zealous relationship manager of the Protocol;

6. Under the terms of your mortgage, your lender is not under an obligation to provide you with the best price for the property if it is repossessed. Ultimately, selling your property through an estate agent may be a preferred option;

The above is not meant to be an exhaustive summary of the steps you may take to protect against repossession. However, we hope that it will certainly focus your mind on some of the key issues to consider should you find yourself in the unfortunate position of possible mortgage arrears.

Dennis Thomas – Residential Property Department
dennis.thomas@smithpartnership.co.uk