Repossession is when a mortgage lender takes possession of a house and sells it to recoup the money that it has lent the homeowner, secured on the property.
Repossession usually happens when homeowners are unable to keep up with mortgage payments, which is known as falling into “arrears”.
However, homeowner can
sell and rent back their homes in order to avoid repossession.
Homeowners who are struggling to meet their monthly mortgage payments can also renegotiate with their lender to try to cut their monthly payments. Sometimes switching to a lower monthly payment, interest-only mortgage can help. Alternatively, they can sell the home themselves to repay their outstanding mortgage debt. This is often called a “forced sale”. If a homeowner fails to get a cheaper more affordable mortgage or sell their home repossession is usually the next step.
What's happening with repossessions at the moment?
The recession is affecting lots of Brits and as a result repossessions soared last year as increasing numbers of homeowners fell into arrears.
The Ministry of Justice, reported 114,296 repossessions orders that’s a 20% increase. It is important to note that not all repossession orders result in an actual repossession, as lenders and borrowers can still come to an agreement at any time after the proceedings have begun.
Figures from the Council of Mortgage Lenders (CML) show about 40,000 properties were repossessed last year, up more than 50% on 2007. The CML has forecast that repossessions could rise to 75,000 in 2009, matching the record highs of the early 1990s.
Why are repossessions rising?
Repossessions are continuing to rise as the recession continues. Job losses are increasing and people are unable to make their mortgage repayments.
The credit crunch only intensified the problem. Homeowners rely on credit cards and loans to supplement their monthly salary if they are falling short each month. The high interest rates that were seen last year forced many borrowers into difficulty.
What options are there?
There are a number of options to help those facing repossession. One way is to
sell and rent back. This option allows you to sell your home for cash pay off your debts and leave you with a lump sum so that you can continue living in your home by renting it back.
