What is Repossession and How does it work?

It’s important to realise that different countries have different laws relating to repossessing properties and it’s therefore important that you take specific legal advice, either from your solicitor or, in the UK, from a body like the Citizens Advice Bureau (CAB) if this is happening to you.

There are several way a borrower can breach the terms of their mortgage, but usually its by falling behind on monthly repayments. Sometimes, borrowers have been caught out for “scheme abuse,” a common example of this is where they are living in property where the lender has a buy to let mortgage on it, or renting out a property with a residential mortgage on it without permission.

The lender will have various options open to them under the terms of the original loan agreement. In certain parts of the world, one of the harshest legal remedies is known as ‘foreclosure,” in the UK it's known as “repossession.”

Repossession is when the lender takes the home back and sells it in order to raise enough money to repay the loan. However, and this is important, unlike in cases of repossession, a strict foreclosure usually results in the homeowner losing all of his equity in the home.

In England & Wales, repossession is rare, with the borrower’s rights being more widely protected.

However, this doesn’t mean that you cannot still lose your home if it is subject to a mortgage or other loan. The lender may still apply to the courts for possession and an order for the sale of the property. The monies raised will be used to pay back the loan, any outstanding interest, sales and other costs and penalty charges.

The difference between possession and foreclosure though, is that after repossession the borrower will still have rights to any remaining funds left after the loan, any interest and other charges / penalties have been met.

If you are being threatened with repossession it’s important that you take legal advice as soon as possible. In many cases, delaying an order for repossession and thus buying you time to find a suitable solution is likely to be the best course of action. You may find a way to repay the outstanding debts, agree a repayment programme or buy time in order to sell the property yourself, thus reducing the costs associated with repossession proceedings.

Repossession proceedings are extremely stressful and upsetting. It’s important that you take advice early and keep your head.

The good news is that courts in England generally have a desire to be fair to the borrower and if you can provide good evidence that you are making plans to repay outstanding debt in a sustainable manner, you still have a good chance of retaining your home, at least in the short term.