Mortgage Arrears & House Repossession: A Complete Resource for Property Owners
If you are in mortgage arrears and facing a potential repossession it is a serious situation to be in.
Thankfully, repossession isn’t something that happens overnight. The repossession process can take many months and during that period you’ll have time to do something positive about it.
In this article, we’ll look at what being in mortgage arrears means and how long a property repossession process takes.
Depending on your current possession, if you have missed one mortgage payment or you have missed many and now received a possession order, each stage has a specific process and timeline to consider.
At the start of this article we consider the first stage which is your first missed mortgage payments. We then look at what happens throughout a repossession to help you understand each step.
Contents
- Step 1 - Arrears
- Step 2 - Court
- Step 3 - Eviction
- Conclusion
Important Disclaimer
The information provided in this article is for general informational purposes only and is not intended to be legal advice. While we strive to ensure the accuracy and completeness of the content, laws and regulations may have changed since publication. We recommend consulting a qualified legal professional for advice tailored to your specific circumstances. We are not responsible for any actions taken based on the information contained in this article.
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by Robert Jones, Founder of Property Investments UK
With two decades in UK property, Rob has been investing in buy-to-let since 2005, and uses property data to develop tools for property market analysis.
Step 1 - Mortgage Arrears Start
Technically a mortgage goes into arrears when you miss a payment. But some lenders offer an unofficial grace period before they'll even contact you about it. Depending on what date in the month your payment usually goes out, you may not receive a letter until the following calendar month.
If a property owner continues to fail to keep up with mortgage payments and does not engage or speak with the mortgage lender, eventually the lender may seek possession of the property through the courts to sell it and repay the loan.
The law is different across the UK and we will primarily write this article for property owners in England and Wales. This additional government article maybe helpful for you if you are potentially facing repossession in Scotland.
The law is also different for buy-to-let mortgages, as these are not regulated in the same way as homeowner mortgages.
Mortgage arrears are currently hitting hard and if you are in this situation you are not alone. UK finance reported 96,070 homeowner mortgages were in arrears of 2.5% or more in the second quarter of 2024. With 13,570 buy-to-let mortgages in arrears and having missed payments of 2.5% or more of the mortgage balance. Yet only 980 homeowner mortgaged properties and 710 buy-to-let mortgage properties were taken in to possession in the second quarter of 2024.
So hopefully you can see, out of all the properties with mortgage arrears, most lenders don't want to repossess if they don't have to and will only use repossession as a last resort.
On 23rd June 2023, the then Chancellor of the Exchequer, Jeremy Hunt, announced a new 'Mortgage Charter' that had been agreed with our countries principal mortgage lenders. This included a number of aspects to help property owners worried about losing their home and worried about changing mortgage products when their current one is coming to an end.
This 'Mortgage Charter' announced many support elements, including
It is important to note that the 'Mortgage Charter' does not extend to buy-to-let mortgages and the timeline for repossession of these properties from landlords can be significantly shorter.
There is some additional protection for tenants in this scenario depending on what part of the UK the property is in. In England for example tenants can check if they have a right to stay if a landlord falls in to mortgage arrears and the property is repossessed.
What Mortgage Lenders Do First
Mortgage lenders can’t just knock on your door and throw you out. They have to follow what is known as The Pre-Action Protocol for Mortgage Arrears, first. This protocol requires that you are properly and fully notified and given a chance to put things right way before a repossession process is started.
The lender has a duty to follow certain procedures before they take you to court. If these duties have not been met, then the court may postpone its decision to issue the Order for Possession.
These duties include:
- Treating repossession as a last resort and properly considering any reasonable suggestion for paying down the arrears
- If they reject any suggestion that the borrower makes for repayment then they need to inform the borrower why the suggestion was rejected, in writing, within 10 days
- Communicating with you in a way that is easy to understand
Steps You Can Take To Stop Arrears Growing
One approach you might consider, once you realise that you can’t make a payment, is to contact your lender BEFORE they contact you.
Pre-empting the process and contacting your lender can often help as lenders tend to see those who approach them as being more responsible and more committed to settling their arrears than those that do not.
If you do this, however, you’ll still need a plan of action.
Creating a Budget
Preparing a budget at the earliest possible moment is a good thing to do, for two reasons:
Firstly, knowing exactly what you can and cannot afford gives you a fighting chance of getting things under control.
Secondly, a budget can show your lender that you are serious about putting the situation right and have the facts and figures to hand that will help you achieve this end. You can use a budgeting tool to do this.
When you do your budget you will need to look at areas where you can either reduce your spending or increase your income.
Here you should also be checking whether or not you have mortgage payment protection insurance that could help with your payments. It sounds obvious but if you did find that you were struggling with repayments only to find out that you were actually insured for that eventuality, you wouldn't be the first.
Try to Make Payments
If you can make a payment or part payment immediately then you should do so. Also, you can suggest a repayment plan to your lender for settling the arrears.
There are also some other things you can do to help your situation which, under the Protocol for Mortgage Arrears, your lender must give you an opportunity to do.
Including claiming on any government support
- Civil legal advice
- Support for mortgage interest
- Housing loss prevention advice service
- Step change help charity
You may also be eligable to ask your lender to apply 'breathing space' for up to 60 days for you and in some cases longer. Here is a government article on how applying 'breathing space' can help.
Step 2 - Court Process
If your arrears progress and you haven't managed to create a repayment plan with your lender, then the next stage may start, which is, a court process to gain a possession order.
A lender can only repossess your property if the court grants permission.
Understanding Possession Orders
There are three different types of orders for possession that the court can grant and each can have a different outcome.
Being in receipt of a possession order, in and of itself does not mean that you are about to be thrown out of your home tomorrow or that your house is about to be taken from you.
It means that a process has started, at the end of which and in the worst-case scenario, your home could be repossessed.
1. An outright possession order
An Outright Possession Order means that the lender will have a legal right to take possession of the property after a set period of time; normally, 28 days.
Without any changes, this means you will have to leave the house within this timeframe or face an eviction notice.
However, extensions may be granted by the court on exceptional circumstances.
In this timeframe, you are still in a position to negotiate with your lender regarding repayments of your arrears, which, if accepted, will mean you can continue to live in your property.
But after the time has lapsed and if you have neither renegotiated your repayments nor left the property, then your lender can then apply to the courts for an eviction notice, meaning that you will be removed from the house by bailiffs.
2. A suspended possession order
Suspended Possessions Orders are quite common. What this means is that you can stay in your home, as long as you meet certain requirements. For example, if you can agree on a repayment plan and start to pay off the arrears then, as long as you keep to this, you can stay in your home and your lender will not repossess.
You can also request a suspended possession order if you want to sell your home yourself and pay off your debt that way. You can ask the court for a reasonable period of time to allow you to do this. If this is a route you wish to take then there are options of companies that can offer quick purchases of your property.
3. A time order
Time orders are less usual but are still worth knowing about. A Time Order is when the court changes the amount you pay on your mortgage for set period of time to help you get back to a good position. This can include changing the amount you pay, changing the interest rate and delaying the next time you have to make a payment.
It is important to note a time order is usually only made on specific types of loans, like a second mortgage.
Preparing for the Possession Hearing
When your lender applies to a court for an order to repossess this is known as applying for a possession order.
A possession order is not something that will have come out the blue. Your lender should inform you that, from their perspective, an arrangement to recoup mortgage arrears from you have failed and that they will be seeking an order from a county court.
And being a court order, you have the right to be informed that the case is being taken to court, be told of the date and be invited to attend the hearing to contest the order, should you wish to do so.
If this has happened already it could still be several months before your case comes to court as they will have to wait for a court date. It is worth remembering that it is NEVER too late to pay off your arrears, make a part payment, or come to some arrangement with your lender.
This could, effectively, move the process back a stage or two or it could even halt it completely. Another option, at this stage, is that you could sell your home if you wanted to. The protocol states that your lender has to allow for this option.
This option could be attractive, as, by selling your house, you may get a better price than you will if the house is repossessed and it is left to the lender to sell it quickly on the open market with an estate agent or in an auction.
What Happens When Your Mortgage Lender Takes You to Court?
If your lender starts a possession action then you will receive a 'Claim For Possession' of the property from the court. This document will give you the details of the case against you and the date of the forthcoming hearing.
If the lender's case is successful in court then you will be issued with a 'Possession Order'. This order will either give you a list of conditions you must keep in order to stay in the property or it will be an order to vacate the property in a certain period of time.
Importantly, just because you’re being taken to court, DOESN’T mean your lender will be granted outright possession and there are several other, possible outcomes.
You’ll be given the opportunity to argue why your home shouldn’t be repossessed and suggest solutions such as a repayment plan.
It’s a good idea to take legal advice on what might work for you and you can get free impartial advice with the government Civil Legal Aid advice line. Citizens advice also has a step by step guide on what happens at court here.
Other possible outcomes could include being ordered to pay the money you owe but without a repossession. You might be ordered to pay only part of what you owe or be given more time to pay.
It also might be possible to request an adjournment to a later date, to give you more time to come up with a solution, if you have legitimate reasons that an adjournment can help improve the position for all parties.
You could even ask for the case to be thrown out if, for example, you feel your lender hasn’t followed the correct protocols or has treated you unfairly. If you feel this is the case then the financial ombudsman also has a complaint procedure which may help your case.
If Possession is Granted to Your Lender
If your lender has successfully obtained a possession order it doesn’t mean you will be evicted immediately. A possession Order and an eviction Order (more correctly called a Warrant of Possession) are different.
A possession order will state that you have to leave your home on what date. If you do not then the lender will go back to the court and apply for a warrant of possession. All this can take several weeks.
Lenders may well hold off on executing the possession order and the eviction if they think that it can be avoided.
For example, if you come to a repayment arrangement then you should be able to go back to court to get the original possession order changed or cancelled.
Stage 3 - Understanding Eviction and Bailiffs
Should you not vacate the property in that time period then the court will order a 'Warrant of Possession' which is when bailiffs will be authorised to remove you from the property.
The bailiffs must give you a formal Notice of Eviction (known as form N54) which sets out their intention to evict you and states the date. The notice must be issued promptly once the warrant of possession is issued and must be posted or hand-delivered to the eviction address.
The eviction date will normally be at least seven days later and could be longer. If you're willing to leave it may be possible to agree on a date. Also, if you have special circumstances like illness, disability or very young children notify the bailiffs in advance and ask them to take this into account.
What bailiffs can do
Enforcement officers can evict you and any other occupants from your house. They are legally entitled to use a reasonable amount of force to enter your home but are expected to act reasonably.
The bailiffs will arrange for the locks to be changed and for the property to be secured. A representative from your lender may also visit to collect the keys.
What happens to your personal property
Bailiffs are entitled to remove all your possessions from the property. They will sometimes give you a short period of time to remove your things yourself. If that's not enough time they may allow you to come back to collect them at another time.
Police involvement in repossession
Bailiffs can call the police, either before or during the eviction, if they think there could be a breach of the peace. The police won't and can't actually carry out the eviction.
You can also call the police if you're concerned. But they can't stop repossession if the bailiffs have a warrant.
Emergency accommodation options
Your local council is legally required to find you emergency accommodation if you're homeless. But it is a good idea to check what help they are actually able and willing to offer well before you are evicted, so you have a safe place to live if you need.
This article from Shelter provides more information about what help councils can provide if you're homeless.
Conclusion
If you add up that each stage is required – although there are no guarantees – you are looking at many months from the first missed mortgage payment to eviction, especially when you consider the new mortgage charter timeline of a minimum of 12 months.
But please do not delay in taking action or rely on the potential timeframe as every situation is unique.
It is useful to know, however, that when it comes to a potential repossession there will always be some time to consider your options and decide the best course of action for you. Here are the key points to remember:
- Early Action is Critical
- The moment you realise you might miss a payment, contact your lender
- The earlier you act, the more options you have
- Lenders view proactive communication positively
- You Have More Rights Than You Might Think
- Lenders must follow strict protocols
- The courts are impartial and will consider your circumstances
- Various types of orders exist to suit different situations
- Help is Available
- Free professional advice is readily accessible
- Government support schemes exist
- Legal aid might be available
- Your local council has a duty to help with housing
- Selling Your Property Remains an Option
- You'll likely get a better price than through repossession
- Quick sale options are available
- The courts may give you time to complete a sale
Remember: It is NEVER too late to pay off your arrears, make a part payment, or come to some arrangement with your lender. Even if you have received a possession order, options remain available. The key is to stay engaged with the process and seek appropriate support at every stage.
Most importantly, don't face this alone. Use the free government support services available, seek professional advice, and remember that many people have successfully navigated this situation before you. With the right approach and support, you can work toward the best possible outcome for your circumstances and aim to avoid repossession if you wish.
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