What happens if repossession occurs?

Here is some information on what happens after a property has been taken into possession. If you are worried about losing your home see our consumer guide:
Help if you are worried about your mortgage.


 

What happens to your mortgage debt after your home is repossessed?

After your lender takes your property into possession they have a legal duty to sell the property for the best price that can reasonably be obtained. The property will generally go on the market as soon as possible and your lender will get independent, expert advice on the price it should be sold for and the best method of sale.

If the sale of the property results in a surplus after all the money owed to the lender and any other secured lender has been repaid, then this surplus is returned you. Your lender should notify you of the surplus but if you cannot be contacted, the money will either be held by the court or your lender until you can be contacted.

But if the sale proceeds are not enough to pay off the money you owe to the lender, then there is a "shortfall debt" which you still owe your lender after possession.

Interest will usually continue to be charged on your mortgage loan until the property is sold and any shortfall is repaid. There will also be other costs charged to your mortgage account, including estate agents' costs in selling the property and legal costs.

What will the lender do if there is a shortfall debt?

If there is a shortfall, your lender will contact you as soon as possible after the sale of the property telling you that there is a shortfall debt. They will also let you know that the shortfall debt may be pursued by another company.

If interest is being charged on the shortfall debt, your lender will send you regular, written financial statements which will update you on how much you owe.  It is important that you keep your lender informed of your new address after you leave the property so that you receive these statements.

The action that your lender takes will depend on the circumstances. A lender may or may not wish to seek repayment of the shortfall debt, but if they do they must notify you within six years.