What if my mortgage lender threatens to evict me?
January 11, 2009
This document explains the eviction process used to evict homeowners in the UK due to unpaid secured loans. It offers advice on how to prepare for the court hearing and how to deal with lenders.
Firstly it is important to know that your lender can not evict you without a court order.
If you have been given a court order by your lender (received in the post) it usually means that other attempts made by you and the lender to overcome the arrears have failed. Some lenders are very sympathetic to borrowers who have got behind in their mortgage payments and may wait 6 months before applying for a court order. Some lender (of the ‘sub prime’ variety) will be all to quick to take late payers to court.
In order to start the eviction process the lender will apply to the local court to issue a ‘possession claim’ which will give you a date and time for a hearing in the county
court. You should have at least 28 days’ notice of the hearing date. (Note; a court hearing does not mean you will automatically lose your home.) Even if the court decides you cannot afford to stay there, you will not be evicted from your home on the date of the hearing.
What you need to do before the hearing
A document called ‘particulars of claim’ will be sent as well. This sets out your lender’s case for taking possession of your home. You will also receive form N11M called a ‘defence form’ which you should fill in and return to the court within 14 days or receiving it.
It is important you give as much information as possible in the defence form as this give the court a chance to see your side of the story. The court will not evict people unless they have to so give them a good reason why they should order the lender not to evict you. You need to ensure you:
- Check the details of your lender’s claim to see if you agree with them. Say if you think that the information is wrong.
- You will be asked how much you can afford to pay off the arrears. Prepare a personal budget sheet to work out how much you can afford to offer and show this.
- Put down an amount which you can afford, even if your lender has already refused this offer.
- If you are hoping that your circumstances will improve in the future (i.e. the reason why you got in arrears will change or improve), or you want time to be able to sell you home, then say so in the space provided.
You should send this document back 14 days after receiving it. If you have missed this date it is still worth sending it if it will reach the court before the hearing date. Remember to keep a copy.
What you need to on the day of the court hearing
- Come prepared to the court with short noted about what you would like to say at the hearing. Don’t be afraid to refer to them when you speak.
- If your financial circumstances have changed since you filled in the court form work out a new budget sheet and take it with you.
- Take 3 copies of your latest personal budget with you (one for you, one for the judge and one for the lender’s representative).
- Try to answer questions clearly, calmly and fully. Remember you have as much right to put your case as the lender and the judge will be keen to get the full story.
What should you say?
If you think you can pay off some of the arrears in staged payment let the judge know your plan. If the judge agrees the lender can not evict you if you stick to these plans. If the judge does not agree with this plan you can ask for an adjournment or postponement to give you time to sell your property yourself.
If you plan to pay off the arrears in a short space of time (by remortgaging or selling your property ask for an adjournment). You should also ask for an adjournment if you don’t agree with the lenders figures. This will give the lender time to get detailed accounts ready for the judge. If the judge does not accept any of your plans they can the district judge can make a possession order, which allows you a set period, usually 28 days, before your lender can take any action.
What if I can’t pay?
If you subsequently find you can not pay the amount which the court has ordered you to pay, you should go back to the court and ask for the order to be changed. Use the form N244, available from the court office. You should also contact your lender and try to make a new arrangement.
Please contact us if you would like any further advice. It is free and confidential.
How To Stop A Repossession?
January 8, 2009
This article will outline the steps you can take to stop your home being repossessed. It assumes that notice of eviction has been issued by the court bailiffs giving a date and when eviction will occur. If you are not sure if you are at this stage please contact the national debt helpline.
If you have been given a notice of eviction you may be able to stop this, but you must act quickly.
Which forms you need to fill out
If you need more time to sell, to find somewhere else to live, or want to make a revised offer to pay the arrears by monthly instalments you should apply for the warrant to be suspended on court form N244.You can pick up this form from your local county court.
When you fill in the N244 form remember to:
- Write the claim number of the case;
- Write the warrant number;
- Include the reason you have not been able to pay and your new offer (in part A on the front of the form);
- Tick the box in part B saying you rely on evidence in part C;
- Attach your personal budget or write it out on the form in in part C on the back of the form;
- Sign the statement of truth at the end of the form.
Do this as soon as possible to allow the court time to arrange a hearing.
The court will set a date for a hearing, usually before the eviction date. It is imperative you go to this hearing or the court is unlikely to suspend the warrant.
If any further warrants are issued at this hearing you may still be able to ask the court to suspend them (for example, to give you time to find somewhere else to live). If all your efforts to stay in the property fail, you will be given an eviction date.
When the bailiffs come
Bailiffs have the power to force their way into your home if they have to so you need to move out before this date if you have not been able to stop the eviction. If they arrive when you are there you will have very little time to pack up your belongings and will only be able to return to pack up a couple of weeks later. You will then have to get the lenders permission to enter the property again in the future and arrange to remove your furniture. Some lenders try to arguethat they can keep any belongings left in the house. It is safer so remove all that you can before the eviction date.
After your eviction your lender will still add interest to your mortgage until the property is sold. They are obliged by FSA rules to sell your home fast for the best price but in reality their need to get a quick sale to recover their money means that it is likely to sell a lot lower than the price you could receive on the open market. They may sell it anything from 15% - 40% below the market value of the property.
The proceeds from the sale are used to pay off the court costs, the estate agents and solicitors bills, the mortgage and any second or third mortgages. The lender must tell you in writing how the money has been spent.
When will the nightmare end?
They must send you any money which is left over but if not enough was raised on the sale of the property to pay off all secured debts and costs you will still owe money to the lender. Due to repossessed properties being sold below their market value this is all to common unfortunately.
You do not want to get to this situation so take action as soon as possible by trying to pay off the arrears, selling your property before you get evicted (so you get a better price) or selling and renting back your property so you can stay there.
How To Sell Your Home Quickly!
January 8, 2009
Selling property can be one of the hardest and most stressful things you can do in your life. 90% of people sell through an estate agent so it must offer some advantages. So, should you do the same?
Well, it depends on time pressure you are under. When selling through an estate agent you will normally have to go through these stages:
- You need to pay for and complete any renovation and refurbishment necessary (2-3 weeks)
- You will need to conduct multiple viewings (4 to 8 weeks)
- If your estate agent finds you a buyer, you will need to wait a few months for the buyer to arrange a mortgage (8 to 14 weeks)
- If the buyer is in a chain, you will need to wait for their home to sell before yours can be purchase (2-3 weeks)
This can take between 4 to 7.5 months! That is a long time! It is a also a sad fact that 1 in 3 chains break down at the last moment due to buyers pulling out. It only takes one person to pull out and the whole chain falls apart.
How to sell in less than 4 months
However, even with these obstacles in mind it is still possible to sell your home in less than 4 months by these following tips (and having luck on your side):
- Get a reliable, reputable agent.
- Finish off any necessary DIY jobs
- Thoroughly clean and de-clutter you home
- Depersonalise your house and go neutral
It is worth remembering, “buyers are not looking to buy property. What they’re really looking to buy is a better life - property just happens to be the way they’ll get it”
The problems with Estate Agents
In response to many complaints about estate agents the Office of Fair trading conducted a study and found serious concerns over the way estate agents serve the public.The consumer group Which? has also conducted research and found evidence of serious violations of the law and a massive 50% of consumers voicing dissatisfaction over the service received from their estate agent. They said:
“Consumers entering the home-buying or selling process are substantially disadvantaged by the way estate agents currently operate”
Now, in fairness there are some great estate agents out there but they seem to be hard to find. Will you be lucky enough to uncover a good agent? Are you prepared to pay 1.5 - 2.5% +VAT (i.e. the price of a new kitchen) to find out.
So what it the alternative??
One of the more popular alternatives if you need a quick sale is using a specialist home buying company to help you. They can purchase your property directly from you with out the need to go through an estate agent.
Selling Fast to Cash Buyers & “Sell and Rent Back” Specialists
First things first, it is important that you understand that using a specialist property buying company should only be considered if your need for a quick sale is greater than your need to sell for the best price.
Typically you find yourself in need of house buying specialist if:
- You are in financial difficulties
- You are being threatened with repossession
- You would like to sell your property & rent it back
- Your chain has collapsed and you’re totally desperate to sell property
- You need money quickly and remortgaging is not an option
- Bereavement or divorce means you need to move-on as quickly as possible
- You’ve inherited property that you want to cash-in quickly
- You’re emigrating and your property is proving difficult to sell
How Quickly Can Quick Cash Buyers Act?
Exchange of contracts can take anywhere between a few days and 3- 4 weeks. Completion can then be fixed to suit you but the norm is completion within 3-4 weeks.
How Much Can You Expect to Sell for?
Anywhere between 70-85% of your properties open market value (80% is the average) in return for a quick home sale. Open market value is the price a property would sell on the open market within 3 months. This is typically less than the price estate agents advertise properties at as they expect to make offers.
So, the main service home buyer service can offer you is speed and a guaranteed sale.
Certainty and speed are rare commodities when selling property. For this service you have to be willing to sell at a discount. That is why they will buy your property between 70%-85% if its market value.
What other benefits can these companies provide?
A good company will offer to:
- Pay your legal fees (up to GBP 500 which normally cover them all)
- Pay any survey and valuation fees
- Allow you to stay in the property after selling (rent back)
- Meet their promises on price and completion date
- Adhere to some Code of Practice from a recognized body such as the NLA RentBack Scheme.
A Word of Warning!
Beware of any company that does not offer the benefits above. Some companies charge for valuation fees regardless whether they buy the property or not. Also beware of companies that string you along and then reduce their offer at the last minute when you are at your most desperate.
Escape The Stress of Mortgage Arrears
January 8, 2009
If you have missed any payments on your loans you need to check if they are secured or unsecured on your home. If they are secured then they need to be dealt with urgently as the lender has the power to take possession of your property if they are not paid. We are going to discuss secured loans and what to do if you miss these payments.
Contact your lender
The first thing you do is you need to contact your lender to confirm the amount you owe and the steps you intend to take to pay them back. Many lenders would rather put in place a payment plan than repossess properties but there needs to be dialogue between the lender and the mortgage holder. It is very tempting (and common) for people in arrears to bury their heads in the sand rather than face up to the situation but the earlier steps are taken the better it will be.
Most UK lenders are regulated by the Financial Services Authority (FSA) who have rules saying lenders must deal fairly with any customer who is in arrears. In practical terms each lender must:
- have a written policy on how to deal with customers in arrears;
- allow customers to set up a payment plans which is realistic
- send out regular information about the arrears;
- not put pressure on customers through too many calls or letters.
If you took out a mortgage before 31st October 2004 and you think you are being treated unfairly by a lender, you can complain to The Financial Ombudsman Service (0845 080 1800). If you took out a mortgage after this date, then FSA rules apply and it is best to contact them directly (0845 606 1234).
Help towards paying your mortgage
If you need help towards paying your mortgage then there are a number of options you can consider.
- Check that you are not entitled to income support, child benefit, pension credit, jobseekers allowance, working tax credit or child tax credit. Contact your local Department for Work and Pensions office or local advice centre for more information.
- Check to see if your mortgage has payment protection insurance. If it has but you are still refused this contact the national debt helpline.
- Check to see if your lender will buy your home and rent it back to you (these are pretty rare and known as mortgage rescue schemes).
- Check rent back schemes by private companies as they can buy your home and rent it back to you (similar to the mortgage rescue schemes). They can often offer you the option to buy back your home at a later date when you have overcome any debt problems. Please check below for links to one such specialist company.
Arranging to pay off the arrears.
Do not arrange to borrow more money to pay off your existing debts as this will make matters worse in the long term. Switching all loans to a cheaper interest rate may be a sensible solution but increasing your debts is not.
In order to pay off arrears on secured loans you will usually have to pay extra monthly amounts to your lender. Lenders will sometimes ask for the arrears to be cleared over 12 to 24 months. Ask for a longer time to pay the arrears if you cannot afford to do this. If you cannot manage to clear the arrears as quickly as your lender wants, start paying the amount you have offered anyway and explain why you can only afford this, particularly if there are special circumstances (i.e. long-term illness, birth of a child, relationship breakdown or unemployment).
Other options to consider
- Change from an endowment mortgage to repayment/interest only mortgage
- Change from repayment mortgage to interest only to reduce monthly payments.
- Try and move onto a cheaper rate with your existing lender or move to a different lender.
What if I still can not afford my mortgage or arrears payments?
- Look for ways to increase your income (i.e. by renting out a room in the property) or reduce your other outgoings.
- Sell and rent back your home from a specialist rent back firm. Often the rent charged is less than previous mortgage payments.
- Sell your home and move to a cheaper home that you can afford.
What if they threaten to evict me?
If you have been given a court order (via the post) you will normally have 28 days notice of the hearing date. This court order does not mean you will be evicted on the date of the court hearing. This is just so the court can hear the case for and against your eviction. In order to understand the court hearing and preparation required we suggest you contact your local citizens advice bureau or national debt helpline.
Being in mortgage arrears is an incredibly difficult time for those experiencing them but it is very important to take action at the first instance of arrears. Unfortunately, many people get evicted unnecessarily by ignoring their lenders threats due to the stress of facing up to the situation.