Buying a house is often the most significant financial commitment most people will make in their lifetime. For many, it results from years of hard work and saving. Unfortunately, there are situations where homeowners cannot make their mortgage repayments, leading to the lender repossessing their property.
House repossessions can be a distressing experience, but it’s essential to know why they happen and where they are recorded. In this blog, we’ll explore the reasons behind house repossessions and the importance of keeping a record of them.
What is a House Repossession?
A house repossession occurs when a homeowner fails to meet the mortgage repayments. After a certain number of payments go unmet, the lender may take possession of the property to sell it to recover the outstanding debt. Repossession is typically viewed as a last resort. Most lenders will work with the homeowner to find an alternative solution that allows them to keep their home before legal action is taken. It is also possible for you to stop house repossession once the process has been started.
Why Does a House Repossession Take Place?
There are a variety of reasons why a repossession may take place due to a homeowner falling behind on their mortgage repayments. Some common causes include:
Job loss:
This is a common reason for repossession. Suppose a homeowner loses their job and cannot find another one quickly. In that case, they may struggle to make their mortgage payments. Sometimes, they may find a new job, but their salary or wage may be lower than the previous job. As a result, this can make it challenging to catch up on missed payments.
Illness:
Ill health can also lead to a house repossession. If a homeowner becomes seriously ill or disabled and is no longer able to work, they may struggle to cover their mortgage payments. Even if they have insurance, it may only sometimes cover all their expenses, leaving them in a difficult financial situation.
Divorce:
Divorce or relationship breakdown can also lead to a property being repossessed. If a couple who have purchased a house together break up or divorce, they may have to sell their property to divide the proceeds. If they owe more on their mortgage than the property is worth, this can lead to a short sale, damaging their credit rating. In some cases, where one spouse or partner remains in the house and the other moves out, the individual no longer living in the property may refuse to pay, leaving the other in a difficult financial situation if they cannot afford the payments on their own.
Unexpected expenses:
If a homeowner must make unforeseen repairs to their property, it can be expensive, leaving them with less money to make their mortgage payments. Similarly, homeowners may face other bills or debt repayments that may cause them to struggle to continue paying the mortgage.
Unaffordability:
In some cases, homeowners may have taken out a mortgage they couldn’t afford. While mortgage lenders carry out stringent affordability checks on applicants, passing does not always mean that the buyer will always be able to afford the mortgage. For example, a self-employed person may be approved based on their income at the time but then lose business, reducing their income and making it difficult to keep up with mortgage repayments.
Homeowners need to seek assistance when they begin experiencing financial difficulties to avoid repossession. Most lenders offer various types of support, such as payment holidays, to help homeowners find a solution before taking legal action.
Where Are House Repossessions Recorded?
House repossessions are recorded in a variety of places, with the most significant being the Land Registry. The Land Registry is responsible for maintaining an accurate record of all property transactions in England and Wales. The Land Registry’s documents include details of all sales and purchases, along with repossessions. This information is available to the public for a fee.
In addition to the Land Registry, house repossessions are also recorded by credit reference agencies. Credit reference agencies like Experian and Equifax collect and store information about individuals’ credit histories, including missed payments, defaults, and house repossessions. Lenders can use this information to assess an applicant’s lending risk. When a house is repossessed, this record may affect the homeowner’s ability to secure credit in the future.
Finally, local news outlets may also record house repossessions, such as local papers and websites. Publishing details of repossessed properties in the local area is not only to inform the public but also a way of helping potential buyers find properties that may be available for a reduced price.
Why are House Repossessions Recorded?
There are several reasons why house repossessions are recorded. Correct records ensure transparency, allowing potential buyers to make an informed decision regarding potential properties. Doing so accurately describes property transactions and helps maintain the property market’s integrity. Lenders can also use these records to assess the risk of lending to applicants. If you are worried about your personal financial history, then it may be worth investigating the redundancy appeal process.
