What happens when your house is repossessed by your mortgage lender?

1. Eviction

House Repossession AdviceThe lender has to get a court order that authorizes the repossession of the house. When the order of repossession has been issued and you are still occupying the house, you will be given time to vacate the premises. The time allowed is usually 28 days after the hearing. However, if this time is not enough for you to find an alternative accommodation, you can ask the court for an extension of the given period of time. If this time elapses and you have not yet vacated the house, the lender can apply for a warrant of possession since the lender cannot evict you legally.

The Notice of Eviction will be delivered to you and the eviction date and time will be written on the document. You can use this time to come to an agreement with your lender or vacate the premises. Even after repossession, you should not assume that after repossession, you owe the mortgage lender nothing.

2. Responsibility for the mortgage after repossession

After repossession, you are still responsible for mortgage payment even if you are no longer living in the home. Some of the expenses that you will incur even after repossession include:
– Charges for any arrears
– Insurance for the property
– Maintenance charges for the property
– Ongoing mortgage payments and interest payments
– Expenses incurred due to delayed or missed payments
However, the cost for repairs needed is not added to your debt. Usually, your mortgage lender or the person given possession of the house is responsible for the repair costs until the house is sold.

3. When sale of property is delayed

The first and foremost thing after repossession is selling the house so that the lender get the money back as soon as possible. Although selling a house may take some time, some lenders may delay the sale so that they can earn more from you since your debt will keep increasing before the house is finally sold. If this is the case with you, then you can contact your adviser to know what action to take immediately. There is also a provision for you to complain about the lender.

Each mortgage lender has a procedure to follow for complaints. You can try this avenue and if you are still not satisfied, then you can use the Financial Ombudsman Service. This service provides dispute resolution between financial service providers and consumers and the service is independent and fair.

4. How mortgage lenders sell properties

Before the house can be sold, the mortgage lender will get your house valued so that the price range can be identified. Once this is done, then the house can be sold the normal way or it can be sold through an auction. The normal way is when the house is placed on the market and an estate agent is contacted to help with the sale of the house. This method is preferred since you can get more money from this method compared to the auction method.

The auction method is beneficial to the lender and is usually preferred. This is because the house can be sold much faster and the only thing the lender may care about is getting back the amount owed as soon as possible. However, this method is disadvantageous to the consumer since the whole debt may not be covered and may still be responsible for payments even after the sale of the house.

The lender has a duty of care towards you which means that the lender will sell the house at the best price possible. If the lender is selling the house for a lower amount than the current market price and there are better offers being made, you have the right to delay the sale and sell it at the price that it is worth. To delay the sale, you need to go to court to get an injunction. However, it should be done before completion of the sale. You then have a chance to sell the home yourself at a price better than what was offered to the mortgage lender.

5. Proceeds from the sale

When the house is sold, there are 3 cases which can result from the sale. One of them is that the amount acquired from the sale is exactly the same amount that you owe your lender up to the current date. In this case, the money goes to the lender and you are no longer responsible for any more payments.

The second case is when the amount acquired from the sale is higher than the amount you owe your lender. In this case, the surplus should be given to you after the debt has been paid and you will no longer be liable for any payments. If you are not able to be contacted, the money will be held by the lender until you can be contacted. The surplus will be determined after the lender has deducted the money you owe, the charges incurred for legal fees and fees incurred when dealing with auctioneers or estate agents who may have helped in selling the property.

The third case is when the house has been sold at the market price or even at an auction but the amount acquired is not enough to cover the debt you owe the financial institution. In this case, all the money will go to the lender and it will be deducted from what you owe. You will still have the responsibility of paying the remaining amount. The lender may take legal action to ensure that you pay the remaining amount including any interest incurred during the period of delayed payment. The financial institution will regularly send you financial statements informing you of the amount owed and the interest accrued up to that particular time. However, there are some lenders who refrain from demanding the shortfall amount from you. The decision will depend on the lender.
When you have moved to another place and your lender still demands the shortfall, you may need to inform the lender of your current address.

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