Do I get any money back if my home gets repossessed?

Conversations we have been having with home owners that are in arrears on their mortgage, seem to touch on the question of whether or not they will get any money back if their home has been repossessed.

The short answer (and every situation differs) is more than likely not and here’s why.

Most repossessed properties are often sold below market value otherwise it would take time and be difficult to sell. For your lender, time is money and the longer your home is on the market, the longer their money is at risk and cannot be used to generate more income and make up for the loss on the deal they had with you.

Lenders are in the business to make money and they make money by taking virtually no risks, as it is your home, or “technically theirs” that removes the risk, because you have agreed with them that if you do not keep paying your monthly mortgage, they can take back the home. 

When you take out a mortgage on a home, you agree to allow a charge, legal jargon for a financial claim against the property that means a sale of the property can only take place if the lender agrees and they get paid back first, what is owed.

So, if your lender has followed the repossession process correctly and your home is repossessed, the first thing that will happen is it will be placed on the market for at least a price that covers the debt and all of the repossession costs and sometimes the mortgage payments that have been missed. If the lender cannot get all of these costs covered, they will then look at getting at least the money back that they lent you to buy the property.

If the lender fails to get the money back that they lent you, then they have the right to come after you for the balance, which could take you years to pay back and have consequences attached like impacting your credit rating. So it’s important to remember this if you are facing repossession and remember that there are ways to slow the process down and in some cases stop the process. 

Preventing having your house being repossessed is always better than the cure and there are options like selling and paying back the lender with the proceeds and if done right, then you may get some money back, have avoided repossession and been given a chance to start again with a clean sheet.