Repossession rescue (A 3point guide)
In this brief blog, we will cover what options you have in regards to a repossession rescue.
What is a repossession rescue?
A repossession rescue is simply financing options which look to prevent your home from getting repossessed by clearing any outstanding debts.
It may be possible for mortgage lenders to offer you a repossession rescue in the form of a remortgage or second charge mortgage if you are at risk of getting your home repossessed.. This will usually be done as a short term finance option which releases any equity you have in your property to cover all your debts and then gives you the opportunity to better your credit file and score before remortgaging to a much better rate than the one you would have gotten when you obtained a repossession rescue.
You can expect the mortgage rates on repossession rescue products to be very high due to the nature of the product and the creditworthiness of the borrowers.
Different mortgage lenders have different criteria in regards to what mortgage products they may offer for those looking for a repossession rescue.
The basis of your mortgage affordability for a repossession rescue product will usually fall on the below:
- How much equity you have in the property
- How much you owe in arrears and how many months you are in arrears?
- Is the property a suitable collateral
- Do you have any other debts?
- What is your credit score like?
- How dd you get into mortgage arrears?
- Do you have a stable income and can you afford the monthly mortgage repayments?
How much equity you have in the property
The amount of equity you have in the property will play a big role in if you can get a remortgage to repay your existing debts. This is because if the amount of equity you have isn’t enough to repay your existing debts you may find that you need to borrow further from elsewhere.
Having little equity will also affect the loan to value rate the mortgage lender may be willing to offer you and could end up making the repossession rescue mortgage kore expensive than it would usually be.
How much you owe in arrears and how many months you are in arrears
How much you owe is of course a big factor in deciding if you are eligible for a repossession rescue as if this amount is much bigger than the equity you have in your property and the mortgage lender is not willing to offer you an LTV over 10% then you may not be able to use a repossession rescue remortgage as your get out of jail card.
The number of months you are in arrears will also limit the number of mortgage lenders who may be willing to offer you a repossession rescue remortgage as if you are in 1 months arrears.
Most mortgage lenders may see that you arent so bad and you may be able to salvage the situation quickly. If you are however in more than 3 months arrears then your creditworthiness will begin to take a beating and you may find the number of mortgage lenders willing to offer you a repossession rescue mortgage will shrink.
The reposession rescue mortgages you may have on offer to you will likely have higher mortgage rates, higher mortgage fees and may even require you to increase the equity you have in the property before they lend to you.
Is the property a suitable collateral?
If the proeprty you have is a grade 2 listed building or a non standard construction then you may find that there aren’t many mortgage lenders willing ot offer you a reposession rescue remortgage as they may find it hard to sell the propeety if they want to repossess the property from you in the future.
This is because they may find it hard to see how the market for that property will perform under a difficult housing market or what structural changes may occur in the future that reduce the value of the property.
Do you have any other debt?
If you have other debts outside of your mortgage arrears debt then you may find it harder to get a mortgage from a reposession resceu lender as they may see you as not being creditworthy and may not be willing to offer you much more borrowing outside of your mortgage arrears and find it inevitable that you will be able to remortgage to a cheaper mortgage lender in the future due to the other debts you have which may have ruined your credit score or keep up your monthly mortgage repayments on the repossession rescue mortgage.
What is your credit score like?
If your credit score is good then this could indicate that you have always been a creditworthy person and may have just gotten in some financial trouble. If your credit score is bad then the mortgage lenders will view you as being less creditworthy and may not offer you a repossession rescue remortgage.
You can check your credit score from all four credit bureaus including Crediva by getting a free trial with checkmyfile. You should check for any errors on your credit report and get this reported to the relevant credit bureau.
How dd you get into mortgage arrears?
If the reasons you got into mortgage arrears are acceptable to the mortgage lender as they do not indicate you have bad financial habits or were complacent in the situation then you may find mortgage lenders will be more willing to lend to you.
Do you have a stable income and can you afford the monthly mortgage repayments?
If you have a stable income and are able to prove this to the mortgage lender then you may find that there are much more mortgage lenders willing to offer you a repossession rescue.
However, if you are self-employed and don’t have a stable income you may find that many mortgage lenders may be less willing to lend to you.
Mortgage lenders will also carry out their standard mortgage affordability checks to see if you can afford the mortgage and continue to make the monthly mortgage repayments. If they find that you are unable to do this they will not offer you a repossession rescue remortgage.
Steps to avoid a home repossession
If times have gotten harder and you are on the brink of repossession then there are some steps you have in place which you could have taken and may still be able to take.
Increase your mortgage term
You could increase your mortgage term to reduce the amount you are required to pay back each month in monthly mortgage repayments. Most mortgage lenders may require strict affordability checks to ensure you will still be able to keep up on your monthly mortgage repayment during the increased term.
Get a mortgage payment holiday
You could also ask the mortgage lender for a mortgage payment holiday which will allow you time to arrange your finances and resume making your monthly mortgage repayments. You should be aware that a mortgage repayment holiday will mean that you owe more in interest by the time you start repaying your mortgage again than you would if you had paid your mortgage as normal.
This is because when you stopped making your monthly mortgage repayments you also stopped repaying the mortgage balance(which is a portion of your monthly mortgage repayments) and this balance is now much higher than it would have been at the same time if you had continued paying your monthly mortgage repayments and interest is being charged on it
You may also be able to assess drawdowns of any previous mortgage overpayments you have made.
If you are over 55 then you may be able to get an equity release product such as a retirement interest-only mortgage or a lifetime mortgage where there may be no monthly mortgage repayments and the capital balance is repaid when you die or move into long term care.
There are other alternatives to remortgaging as a form of repossession rescue. There are a variety of firms which offer different formats of a repossession rescue but you should seek independent legal and financial advice.
If you need financial advice and you live in the UK then you could contact the Money Advice service over the phone or via chat for impartial advice.
You can also contact the debt charity “Step Change” if you are in debt and need help.