Do not panic if you’re worried about house repossession. Most major lenders have now agreed with the government to provide a 12-month grace period before repossession can begin. We’ll get into all that and more in this post about what you can do to stop house repossession in Sheffield.
Latest government guidelines on house repossession
House repossession is a scary situation affecting thousands of people across Britain every year. Sadly, the numbers rose in the late-2022 and early 2023 period. As you might expect, this increase correlated with the ongoing cost of living crisis that has affected everyone in the UK in one way or another.
Arguably, mortgage holders have been hit the hardest by the cost of living crisis. Not only have prices gone up for household essentials like food and energy, but so have mortgage interest rates.
The numbers do not lie. 45% of mortgage holders have struggled to keep up with bills and credit commitments this year, according to data from the charity StepChange. Which? estimates that 2m households missed or defaulted on at least one mortgage, rent, loan, credit card or bill payment in April this year.
If you’re worried you cannot afford to pay your mortgage, there’s some good news. Most major lenders have signed the new Mortgage Charter, a ruleset requiring them to provide additional support to borrowers. As of August 2023, 90% of the mortgage market has signed it, but you should check with your lender to see if they are a signatory.
What does this mean if you’re worried about repossession in Sheffield? The new regulations set forth by the British Chancellor and the Financial Conduct Authority (FCA) will prevent lenders from repossessing until 12 months after the first missed mortgage payment. Additionally, the lender must offer tailored support and allow you to alter your mortgage type and/or term.
How can I stop my house from being repossessed?
In light of the new FCA guidelines for the mortgage market, you have more breathing space before your house in Sheffield can be repossessed. But it’s still vital that you act quickly.
Be proactive and contact your lender at the first sign you may struggle to pay your mortgage. It has always been the case that repossession is a last resort for lenders, and this is especially true today.
Concerned that you won’t be able to make your next payment? Don’t worry. Your lender is very unlikely to begin repossession just because you miss one payment. It’s standard for lenders to give borrowers a 15-day grace period to make a missed payment without incurring a late fee or hampering their credit score. Your particular lender may not do this, so make sure you check in with them to find out.
If you believe you can no longer afford to pay your mortgage in the long term, you should be upfront with your lender. They will be able to offer you support and will be open to negotiating a repayment plan. The FCA requires lenders to consider all reasonable repayment requests. A lender can only begin court action to repossess your Sheffield property if both parties fail to reach an agreement.
It’s best to act fast and begin negotiating with your lender before arrears pile up. No matter where you are in the repossession process, your lender will be open to confer with you if you’re committed to clearing your debt.
Repayment plans to prevent repossession
If you’re in financial difficulty but have not yet gone into arrears, here are some ways to stop repossession. Each has pros and cons, so we recommend talking with your lender and an advisor to understand what is best for you.
Extend your mortgage term
By extending the term of your mortgage, your payments could become more manageable. For example, if you extend the term from 25 years to 30 years, you will pay less each month. Keep in mind that you will ultimately be paying more interest over time if you do this. Under the new Mortgage Charter, you will be able to switch back to your original term within 6 months.
Your lender may grant you a payment holiday if you’re suddenly unable to pay your mortgage. During a payment holiday, all mortgage payments will be reduced or even completely stopped for a set period. Often, eligibility will depend on a person’s track record.
Seek government support
You may be entitled to government support to prevent arrears and eventual repossession in Sheffield. Lenders commonly signpost mortgage holders to the support for mortgage interest (SMI) scheme. With this, the government will send money directly to your lender to cover some of the interest you owe. It functions as a loan, so eventually you do have to pay it back.
Switch to an interest-only mortgage
In line with the Mortgage Charter, most signatories are allowing borrowers to switch to interest-only mortgages for 6 months. This will drastically reduce the amount you will pay each month without affecting your credit record.
Stopping repossession if you’re in arrears
You can still stop repossession even if you’ve gone into arrears and your lender has begun the repossession process. Either continue to negotiate a repayment plan with your lender or explore one of the following options.
Sell the house voluntarily
It’s far better to agree to sell your house in Sheffield yourself than to be evicted and repossessed. The consequences of house repossession will burden you for years, affecting your credit score and making it harder to get another mortgage.
You’ll want to sell your house as soon as possible to curb future arrears. The problem is that there’s no guarantee you’ll sell fast on the open market. But that all changes when you use a cash house buyer like We Buy Any Home. You can get a fast, simple and hassle-free sale guaranteed and even continue living in your property once we’ve bought it from you. Get a free, no-obligation quote today to sell your house fast in Sheffield.
Rent out your house
Consider letting your house to avoid repossession. If you can stay with friends or family for the foreseeable future, you can pay the mortgage with the money you make from renting out the property.
Capitalising the arrears
Depending on how much equity you have in your Sheffield property, your lender could agree to add your arrears to your remaining mortgage balance. To keep the monthly payments manageable, you can extend the terms of your mortgage while doing this. Alternatively, if you prove that your finances are in better order, you may be able to back your arrears alongside your mortgage.