Home repossession

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sarah_id1 wrote: »

Thanks Hamish. I would expect that percentage to be high out of London and low in London as London has high demand. But I still see properties in London being repossessed by banks. What confuses me is that is the defaulter not bothered to recovered his deposit (could be as high as 40%) rather than let the bank have it all.

Another question
If a property is £200 and I put deposit £60
At the time of repossession I owe bank £140. I did some modernisation which increased the property value.
At the time of repossession Bank sold it for £220 (made a profit of £20K)
Will I expect my deposit(£60) returned and what about £20 profit!
Or I just forget all including my deposit.....

Consider amt in K's

Thanks again to all.

If you are repossessed the bank will sell the house. They are legally obliged to get the most for it that they can within a reasonable length of time. To do this they will either sell via auction or through an estate agent and tell the estate agent to continue to market the house while any agreed sale is being processed.

Until the house is sold, interest will continue to accrue on the mortgage, possibly at a higher rate than the normal rate being paid before. The bank will also have costs connected with repossessing (eg court fees, estate agents' fees, legal bills).

The bank will take the sum of money the house sells for and deduct the mortgage amount outstanding including missed payments and extra interest. They will also deduct their fees and costs. All of the remaining money is yours.

So to take your example. You have a mortgage debt of 140. The house sells for 220. You get 80 less the costs to the bank of selling so perhaps you end up with 78 or 75.

The parts of this that are what you put down in the first place and what is from HPI or you doing up the house are neither here nor there. The 2 figures that matter are what you owe the bank and what the house sells for.

If the house sells for less than you owe the bank, you still have that debt and you will be expected to pay it. If you can't then you are insolvent and so may be bankrupted or enter into some kind of arrangement to pay off the debt.

sarah_id1

Thanks you for explaining this very well. You guys are awesome.

Well this is risk analysis I am doing before I purchase the house. I don't think I need to worry much eventually as I am buying in (East) London and London properties are not hard to sell.

HAMISH_MCTAVISH

I think the thing to remember is that repossession is vanishingly rare as a percentage of overall mortgages.

Less than 1%, even in this, the worst recession in a century.

It's simply not in the banks interest to repossess your house. They don't want the hassle, cost and drama.

If you fall into financial difficulty, there are many, many steps to go through before repossession becomes remotely likely.....

--Do you have mortgage repayment insurance in the event you're made redundant or become seriously ill? If not, you should, as it's cheap and will avoid the problem ever arising.

--If not, after 13 weeks (and the sole earner) you become eligble for SMI which will pay your mortgage interest at the current industry average for up to 2 years.

-- By negotiating with the banks, they'll almost always agree to switch you to interest only for a year or two whilst you recover financially and find a new job.

-- People tend to stop paying almost everything else before they stop paying the mortgage, and of course, in anything other than a one bed you can take in lodgers etc to help pay the mortgage for a time if need be. Between a part time job and lodgers you could probably survive for a year or more if you had to, which is plenty of time to find a new job.

--Even if none of the above are in place, for some unlikely reason, the banks will still allow you (and in fact encourage you) to sell your own home first rather than be repossessed, and will in most cases work with you to allow you time to do so.

--Even if it comes down to repossession proceedings, it still has to go in front of a magistrate. Who will not automatically award possession to the bank if you can offer a reasonable way to proceed, such as an alternative temporary payment arrangement or a reasonable prospect of being back in work soon.

It's honestly pretty hard to get your house repossessed, you have to be incredibly unlucky or incredibly ill prepared to let it go that far....

ultrawomble

HAMISH_MCTAVISH wrote: »

I think the thing to remember is that repossession is vanishingly rare as a percentage of overall mortgages.

Less than 1%, even in this, the worst recession in a century.

Might that be due to the tax-payer paying peoples' mortgages for a couple of years?

HAMISH_MCTAVISH

sarah_id1 wrote: »

Thanks Hamish. I would expect that percentage to be high out of London and low in London as London has high demand. But I still see properties in London being repossessed by banks. What confuses me is that is the defaulter not bothered to recovered his deposit (could be as high as 40%) rather than let the bank have it all.

Basically almost all repossessions are initially marketed through estate agents. 80% sell that way for the going market rate. 20% don't and end up at auction.

The bank doesn't get all the deposit.... They have to sell at market rate and then refund the owner the difference between what they owe and what it sold for. They have a legal obligation to get as much money for the house as they can when they sell it.

The vast majority of people in financial trouble manage to either work with the banks to fix the problem or sell the house before repo, which is why it's so rare.

But there will always be some circumstances where the bank has no choice but to repo. For example, a person has a complete mental breakdown and refuses to deal with any of the problems themselves, and has no family to deal with it on their behalf... Someone with drug or alcohol problems that goes into a tailspin and refuses to work or deal with the banks..... Someone with depression that buries their head in the sand and won't help themselves.... etc etc etc

Now realistically most of these people had no business buying a house to begin with, but thats another story..

Another question
If a property is £200 and I put deposit £60
At the time of repossession I owe bank £140. I did some modernisation which increased the property value.
At the time of repossession Bank sold it for £220 (made a profit of £20K)
Will I expect my deposit(£60) returned and what about £20 profit!
Or I just forget all including my deposit.....

Consider amt in K's

Thanks again to all.

The bank must sell at the maximum price they can achieve for the house in the condition it's in when they sell it, and refund the balance to the homeowner less costs and debt owed.

It's that simple.

HAMISH_MCTAVISH

ultrawomble wrote: »

Might that be due to the tax-payer paying peoples' mortgages for a couple of years?

I listed half a dozen factors...... That was one of them.

ultrawomble

HAMISH_MCTAVISH wrote: »

I listed half a dozen factors...... That was one of them.

I know - just reinforcing the point that the tax-payer is supporting these low levels of repos that might otherwise go to hardworking and deserving FTBs.

ukcarper

ultrawomble wrote: »

I know - just reinforcing the point that the tax-payer is supporting these low levels of repos that might otherwise go to hardworking and deserving FTBs.

Help with mortgage interest is not a new thing.

ultrawomble

ukcarper wrote: »

Help with mortgage interest is not a new thing.

I didn't say it was. In Feb 2010, there were 227,000 mortgages being paid by the tax-payer - I wonder what number that is now?

http://www.parliament.uk/briefingpapers/commons/lib/research/briefings/SNSP-05818.pdf

HAMISH_MCTAVISH

ultrawomble wrote: »

I know - just reinforcing the point that the tax-payer is supporting these low levels of repos that might otherwise go to hardworking and deserving FTBs.

Do you believe support for rent in the event of unemployment should be abolished too?

Most of these people now being supported in a time of hardship were hard working and deserving "taxpayers" for many years.... Not entirely unfair for them to now see a return on the taxes they have paid into the safety net.