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How To Sell Your House If You Are In Arrears?

Property Saviour » Mortgages » How To Sell Your House If You Are In Arrears?

Every year in the UK, around five thousand homes are repossessed because people have trouble making ends meet.

If you find yourself in mortgage arrears, you’re not alone. Lots of people experience this problem year after year, and there are a few things you can do.

Can you sell a house when in arrears? Yes, you can! Selling your home to pay off the debt is an option, but you also have other choices. Remember that you’re not by yourself, and assistance is close at hand.

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Mortgage Arrears is a Fairly Common Problem

Nearly 80,000 homeowners with a mortgage in the UK are in arrears every year. It’s almost 3% of all mortgage holders are behind on payments, and those numbers have been even worse due to the COVID-19 pandemic.

Although arrears numbers decreased a bit during the period of mortgage holidays offered to help homeowners weather the economic difficulties of the pandemic, the figures quickly returned to their original levels when the UK reopened for business.

As the recession deepens due to the economic slowdown caused by the pandemic and other global events, many people will struggle to make their mortgage payments, resulting in arrears.

Unemployment is increasing and thousands of workers may be unable to find employment when the pandemic relief measures are withdrawn. This could make it even harder for some to find the funds for their mortgage, leading to mortgage arrears.

It’s important to understand that falling behind on payments is often unavoidable, but there are ways to get back on track.

Whether you fall into arrears due to an unexpected redundancy or you become unable to work because of a long-term illness such as COVID-19′, there are steps you can take to get back on your feet.

Can You Sell a House if In Arrears?

Many people who find themselves in arrears decide to sell their homes as it can help them avoid repossession. It also helps them to pay off other debts and get access to some extra cash to make a fresh start in a new place.

If you’re having trouble making ends meet due to financial issues, selling your house could enable you to move to an area with lower living costs and get back on track. Even if you’re far behind with your repayments, it’s still possible to sell your house and access the equity, as long as it has enough.

If you’ve fallen too far behind on payments, your mortgage lender will repossess your home and put it up for auction. At this stage, you won’t be able to sell the property and withdraw the equity. That’s why it’s important to contact your mortgage provider as soon as you’re facing financial difficulties.

Alternatively, you could work with a house buyer, even a cash-for-homes buyer, to get the money you need to pay off your mortgage and avoid repossession. Repossession can have a big effect on future credit applications, including those for another property

Selling your home with a cash-for-home buyer is a great way to make sure that doesn’t happen. Plus, you’ll be able to keep any money left over to help clear your current bills.

How To Sell Your House If You Are In Arrears
As the recession deepens due to the economic slowdown caused by the pandemic and other global events, many people will struggle to make their mortgage payments, resulting in arrears.

Can Lenders Still Repossess Homes?

The Financial Conduct Authority (FCA) put a stop to home repossessions during the COVID-19 pandemic. Homeowners were safe from having their homes taken away if they were behind on payments for nearly a year.

Unfortunately, the ban expired in April 2021, so if you lost your job or income due to the pandemic, your home can now be repossessed. Lenders have created programs to assist people in this difficult time, but you must apply for them or talk to your lender for help.

Avoiding Home Repossession

If you’re trying to prevent home repossession and handle your arrears, the best thing to do is talk to your lender as soon as you realise you’ll miss a payment. Missing a single payment can easily put you in arrears, so waiting for your lender to contact you is not the best course of action.

Your lender may give you a grace period of ten to fifteen days to come up with the extra money. Even if you’re unable to make the payment during this time, you can still make it up, but you will be charged a late fee, usually between five and ten per cent of your monthly payment amount.

 If the fees start to accumulate or you keep missing your mortgage payments, things can quickly become unmanageable.

Your mortgage lender is bound by the Financial Conduct Authority and the Mortgage Conduct of Business rules, which make sure all buyers are treated fairly.

One of these rules is that if you cannot make your regular payment, the lender must try and work out an alternative arrangement that meets your needs. Repossession is only ever a last resort.

While the temporary solutions may not be ideal, they can help you decrease your monthly expenses and increase your income until your financial situation improves.

Your lender can agree to reduced payments for six months or adjust your mortgage to give you lower payments for a longer period.

If you’re certain your financial issues are not just temporary, the best thing to do is to sell your home as quickly as possible. This will help you act fast, so your mortgage debt doesn’t increase and you don’t get into more trouble with your lender.

Can I Sell My House with Mortgage Arrears to the Bank?

If you’re struggling financially, you may be wondering if it is possible to sell your house back to the bank. Although some property owners have done this, it is not always the best choice, nor is it necessarily in your best interests.

Your loan agreement is a legally binding contract between you and the bank. If you don’t make your payments, the bank can repossess the property, meaning you will lose any equity you have built up.

If they buy it back from you, they may offer a price lower than what you’d get on the open market, which might cover the mortgage debt, but not the extra money you have invested in the home.

Furthermore, if the sale doesn’t meet the amount of the mortgage debt, the lender may add additional fees raising the overall debt.

These could include solicitor costs, estate agent fees, and other expenses. Plus, you are still responsible for the mortgage payments while the home is on the market.

Is Voluntary Repossession a Good Idea
Increasing your mortgage term or temporarily paying only the interest on your mortgage are other options. These will give you more time to figure out how to pay the full amount again.

Is Voluntary Repossession a Good Idea?

Some lenders offer those in arrears the chance to declare voluntary repossession if they can’t keep up with their mortgage payments.

To start the process, you’ll usually write a letter to the bank stating that you can’t make your monthly mortgage payments and that you want to give up the property.

This will result in the sale of your home, but it will be sold for much less than its market value. Additionally, it will hurt your credit score, which could make it difficult to purchase a new home in the future.

For this reason, voluntary repossession is never a good idea. A better option is to try to sell your home using alternative methods.

What to Do Next If You Know You’re About to Be In Arrears?

If you’re unable to make your next mortgage payment, it’s essential to take action quickly. A great first step is to apply for Breathing Space, which is a government scheme that gives you 60 days to find debt advice and a solution to your problem.

To be eligible, you must owe a qualifying debt, live in England or Wales, and not have a debt relief order against you. Additionally, you can’t have had breathing space within the last twelve months.

Mental health crisis breathing space is also available if you’re undergoing mental health crisis treatment. In this case, your carer can apply for the breathing space on your behalf.

The next step is to pay what you can afford towards your arrears. Make an offer to your lender based on what you can pay immediately and explain why you can’t pay more.

For instance, if you lost your job, let the lender know and mention that you’re looking for a new one. This could help build goodwill with the lender.

Finally, you may want to consider changing your mortgage. If you currently have an endowment mortgage, you could switch to a repayment-only mortgage for a lower monthly payment.

Increasing your mortgage term or temporarily paying only the interest on your mortgage are other options. These will give you more time to figure out how to pay the full amount again.

Ways to Sell Your Home Quickly

If you’re behind on your mortgage and selling your home makes the most sense, there are a few strategies to make it happen quickly.

You can go the traditional route and hire an estate agent to list your property. However, this may take up to four months, even if the market is hot.

Luckily, there are other options. For instance, you could put your home up for sale at an auction. You’ll know the exact date it will sell, and buyers tend to be more serious.

Bear in mind, though, that auctioneers may encourage you to set a low reserve and starting bid, which may not generate enough money to pay off your mortgage.

Additionally, you may get less for your property than you would on the open market since auction attendees are usually bargain hunters. Plus, you’ll have to pay the auctioneer a 3% fee after the sale.

Finally, you can work with a cash home buyer. This is a popular option as it’s usually a quick process. Cash home buyers are investors who buy homes at a low price, renovate them, and then either rent or resell them at a higher price.

You’ll typically make 75% or more of the value of your home, and you won’t have to pay any additional fees. On top of that, the sale can be completed in as little as two weeks, helping you to get out of arrears faster and make a new start.

Ways to Sell Your Home Quickly
Cash home buyers are investors who buy homes at a low price, renovate them, and then either rent or resell them at a higher price.

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