Repossessions occur when a registered charge owner, normally a bank or building society obtains a court order to gain possession of a property from the borrower. This usually occurs when the borrower has failed to make the agreed payments on a mortgage or loan secured on the property. Latter stage repossession proceedings only allow the borrower a short period of time to either make up shortfall arrear payments or in certain circumstances, sell the property before final possession by the lender. A repossession order can be put on hold if the borrower makes or agrees to make payments. This allows the borrower to keep control of the properties destiny and gives much needed time to either enable a sale at market level without having to take a reduced repossession price or time to restructure finances.
Bridging finance can be used to prepay mortgage arrears even if a client has a property that is being faced with a repossession. Provided that enough equity is remaining within the property and that the exit route is deemed reasonable to the lender then the use of a bridging loan is a possible way to repay the arrears.
It is however important to note that in todays more financially prudent climate where it is becoming more and more difficult to refinance any borrower who has credit problems, sale of property is normally the only reasonably accepted exit route to the majority of bridging loan lenders. Most bridging loan lenders will also demand that the security property is placed on the market to show the borrowers true intentions before they will advance the loan monies required. Although bridging finance may be an expensive way to raise money, depending on the severity of the situation it may well be the best and only option.
Re-mortgages are pretty much no longer available to clients who have poor credit, even if a large percentage of equity is available within the property and even if the client can afford the monthly re-mortgage payments as they have good income. Secured loans follow similar requirements to a mortgage although they are slightly less stringent in their requirements. If neither a re-mortgage or a secured loan are available to the client then the only remaining option would be a bridging loan or the immediate sale of the property at a possible below market value price, in order to stop an imminent repossession.
The bridging loan would give the applicant the time required to sell the property in an organised fashion and within the timeframe as agreed with the lender. The alternative could be that the client is forced into accepting a low offer for the property or to accept the house being repossessed and sold quickly by the lender in order to get the money owed repaid back to them.
Although certain protocols now have to be followed in terms of how the property is sold after a repossession, the widely held belief amongst most buyers is that repossessions are sold at bargain below market value prices to the buyer. A repossession also leaves a stigma attached to a client that will stay on their credit file for a long period of time, if not forever. This could make it virtually impossible for them to raise any property finance at any time in the future.
In this example of using a bridging loan, we explain how you may have missed payments with your mortgage lender and they have been through the legal stages required to repossess your property. You are unable to refinance with another mortgage lender due to the missed payments now showing on your credit profile. You are therefore unable to stop the repossession even though the loan secured on the property is relatively small. A bridging loan can be used to clear all arrears and possibly raise extra finance to repay other mounting debts. Once you have a period of successfully made payments a refinance with a more traditional lender may be possible to repay the bridging loan. Alternatively the property could be sold or another method used to repay the bridge.
You can potentially avoid repossessions by applying for bridging finance by using our online bridging loan calculator. Rest assured bridgingloan.uk will do their utmost to stop your home repossession.