Reasons for repossession

Mortgage arrears is the most common reason for repossessions. However, failure to pay secured loans, also known as second mortgages, can also result in repossession. This page looks at both mortgage arrears and bankruptcy as reasons for repossession.

Mortgage arrears and repossession

Most people who borrow money to buy a home will have a mortgage. If you do not keep up to date with your mortgage repayments, your lender can repossess your home so that they can sell it and recover the money owed to them. If you miss one payment your lender will send you two letters asking you to bring your payments up to date and can then start legal procedures to repossess your home. Lenders must follow the correct repossession procedures and get a court order called a warrant of ejection, before your home can be repossessed.

If you are having problems paying your mortgage, there are several options open to you to help you avoid repossession. Don't ignore your problems - if you act quickly, you may not lose your home. The section on mortgage arrears looks at all the options that may be available to you.

Secured loans and repossession

If you secure a loan against your home, you are using your home as a guarantee that you will pay the loan back. This means that if you don't keep up with your payments, the bank, building society or financial institution you borrowed the money from can repossess your home. A secured loan may also be called a second mortgage.

If you are having trouble keeping up payments to a secured loan, speak to your lender as soon as possible and try to negotiate an affordable payment plan. Most lenders will usually allow you time to make up missed payments before taking legal action.

Before your lender can start repossession proceedings, they must send you a default notice. If your loan is covered by the Consumer Credit Act, you may be able to apply to the sheriff court for a time order. A time order can give you an opportunity to repay your debt and prevent your lender taking further action to repossess your home.

Find out more about secured loans and second mortgages.

Bankruptcy and repossession

If you owe a lot of people money and cannot come to a realistic agreement to pay off your debts, bankruptcy may be your only option. If you go bankrupt, any assets you have (including your home) can be used to pay off your debts during a period of two or three years. After this time, most remaining debts you have will be written off, and you will probably be discharged from bankruptcy. However, bankruptcy will have a big impact on your ability to get credit in future, so it is essential to get advice before doing this.

In Scotland, bankruptcy refers to both sequestration (the legal process whereby you are formally declared bankrupt by the sheriff court) and trust deeds (a more informal process in which you voluntarily transfer some or all of your assets to a trustee to administer on behalf of your creditors). It is essential that you get advice since these are two separate processes.

You can find more information and advice about bankruptcy at the National Debtline website.

The important points

  • If you do not keep up to date with your mortgage repayments, your lender can repossess your home.
  • If you are having problems paying your mortgage, don't ignore it.
  • If you secure a loan against your home, the bank, building society or financial institution you borrowed the money from can repossess your home if you don't keep up with the repayments.
  • If you go bankrupt, any assets you have (including your home) can be used to pay off your debts during a period of two or three years. 

Speak to a Shelter Scotland adviser

Call Shelter Scotland's free housing advice helpline

0808 800 4444
9am-5pm, Monday to Friday

Email an adviser

You can also email a housing adviser. We aim to respond within three working days.

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