can I sell my house with mortgage arrears?

February 26, 2024

73
Yes, you can sell your house even if you have mortgage arrears. The sale proceeds can be used to clear the outstanding mortgage balance and any arrears. However, you must inform your lender of your intention to sell and negotiate the repayment of any shortfall if the sale price does not cover the total debt owed.

Understanding Mortgage Arrears:

Mortgage arrears occur when you fall behind on your mortgage payments. This can lead to financial strain and, in severe cases, the risk of repossession. However, selling your property can be a viable option to clear the arrears and potentially secure a fresh start.

Steps to Selling with Arrears:

  • Notify Your Lender: The first step is to communicate with your lender about your intention to sell. Transparency is crucial, as lenders may offer temporary solutions to help you manage the arrears while you arrange the sale.
  • Valuation and Sale Price: Obtain a realistic valuation of your property. Setting the right price is essential to facilitate a quick sale, especially when time is of the essence to prevent further financial repercussions.
  • Consider the Equity: Assess the equity in your property — the difference between its value and the outstanding mortgage balance, including any arrears. If there’s sufficient equity, the sale proceeds can cover the mortgage debt and arrears. If negative equity is present, where the debt exceeds the property value, you’ll need to discuss the shortfall with your lender.
  • Selling Process: You can sell the property through traditional means, such as estate agents, or consider quicker alternatives like auction or companies that specialize in fast sales. Each option has its pros and cons, including the impact on the sale price and time frames.
  • Repaying the Mortgage: Upon sale, the mortgage and any arrears are paid off as part of the conveyancing process. Any remaining funds after clearing the mortgage debt are yours.
  • Addressing Shortfalls: If the sale doesn’t cover the full amount owed, you’ll need to negotiate with your lender on how to repay the remaining debt. Some lenders may agree to a repayment plan for the shortfall.

Legal and Financial Advice:

  • Seek Professional Advice: Consulting with a solicitor and financial adviser is advisable to navigate the complexities of selling a property with mortgage arrears. They can provide valuable guidance on legal, financial, and tax implications.

Conclusion:

Selling a house with mortgage arrears is possible and can be a practical solution to resolve financial difficulties. It requires careful planning, open communication with your lender, and professional advice to ensure the process is conducted effectively and within legal parameters.

Answered by:

Alison Gibson

Ascot Mortgage Expert

Last Updated:

18.03.2024

Answered by:

Alison Gibson

Ascot Mortgage Expert

Last Updated:

18.03.2024

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