Arrears on second mortgages and secured loans

If you can't pay a secured loan or second mortgage taken out against your home, your lender may take action to repossess your home.

What is a second mortgage or secured loan?

A secured loan can be a second mortgage or any loan secured against the value of your home.

Second mortgages or other types of secured loans are often taken out to pay for home improvements or repairs.

Repossession if you fall behind with payments

If you miss payments on your second mortgage or other secured loan, your lender can take action to repossess and sell your home.

The second mortgage or other secured loan lender does not have to get permission from the lender that gave you your first or main mortgage before taking steps to repossess your home.

Your first mortgage lender takes priority if your home is repossessed. Any money from the sale of the property is used to repay their loan first. The second lender is paid from what is left.

Find out how to deal with mortgage debts after repossession.

Steps to take if you have arrears

Contact your lender as soon as possible if you are having difficulty paying your second mortgage or other secured loan.

You may be able to negotiate an agreement with your lender to vary the terms of the second mortgage or loan for a temporary period.

Find out how to deal with mortgage arrears.

You may also be able to get some help through support for mortgage interest or universal credit help with housing costs if you claim benefits.

It's also important to look at the cause of your money problems. If you've had a change in circumstances such as a change of job or unexpected bills, you may be able to find ways to save money or ways to increase your income.

Steps before court action for repossession

A second mortgage or other secured loan lender has to follow certain procedures before applying to a court to repossess your home.

These procedures include sending you a statement to let you know that you have fallen behind with the payments (a notice of sums in arrears) and a default notice.

A default notice should contain:

  • details of the missed payments a date by which you must clear your arrears – this must be at least 14 days away
  • information about what happens if you don't clear the arrears within the given time

For more information, see the Financial Conduct Authority's example of a default information sheet.

Find out more about repossession rules for mortgage lenders and borrowers.

Act quickly as soon as you receive a default notice. At this stage, you only have a limited time before your lender takes you to court.

Use Shelter's directory to find a housing adviser

What happens if your lender takes court action

A court decides if a repossession order for your home should be made.

The court can decide to:

  • make an outright possession order
  • make a suspended possession order
  • adjourn (postpone) the case
  • dismiss the case
  • make a time order

A time order allows you to stay in your home and can:

  • reduce the interest rate payable on your loan
  • change the regular amount you repay
  • delay the time your next payment is due
  • increase the term over which you can repay the loan

Find out more from National Debtline about time orders.

Find out more about decisions a court can make.

Last updated 31 Dec 2016 | © Shelter

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