If a homeowner falls behind with mortgage repayments, they are deemed to be “in arrears”. Being in arrears does not always mean the property will be repossessed. A temporary financial issue can be managed effectively if the lender and borrower work together and agree on a short-term repayment plan to help get things back on track.
However, if a change in financial circumstances is likely to be permanent and the homeowner is cannot repay the arrears, a quick house sale could provide a solution to the lender and the borrower.
How Many Payments Must I Miss to Be “in Arrears”?
Technically, a property owner is in arrears as soon as a payment is one day overdue. However, most mortgage lenders allow a 15-day grace period before they get in touch to find out what the problem is.
Can I Sell My House with Mortgage Arrears?
If you’re in arrears and are unable to negotiate an alternative repayment plan with the lender, putting the property on the market is an option to consider. Even if the mortgage lender has started court proceedings by applying for a “possession order”, you are entitled to try to sell the house as a means of repaying the debt.
If the lender has not yet started court proceedings, under the Pre-Action Protocol for Mortgage Arrears, they must not commence such proceedings if you are taking steps to sell your home and pay off the mortgage.
You could return the keys to the mortgage company, but you’ll still be responsible for all the associated costs — mortgage payments, insurances and maintenance — until the property sells. Also, if you’ve handed back the keys or been evicted, the mortgage lender is likely to achieve a sale price far lower than you could if you manage the sale yourself. Lenders often sell properties at auction, which typically attract lower offers from property developers looking to steal a bargain to fix up and sell on at a profit. This could mean the proceeds from the sale will not cover all you owe.
How Quickly Can I Sell My House?
Instead of returning the keys to your mortgage lender and achieving a low sale price, one option is to put your house on the open market and wait for it to sell. However, from the first day a property is on the market to legal completion of the sale takes an average of 42 months in the UK. Add to this the fact that almost half of all house sales fail, and selling via traditional routes becomes less attractive. Remember, all the time you’re waiting for the perfect buyer and for the sales process to run its course, the cost of mortgage repayments, insurances and general maintenance will be mounting up.
A more appealing option for a homeowner in arrears needing a quick sale is to engage the services of a house buying company. House Buyer Bureau is the #1 House Buyer in the UK. We have helped hundreds of homeowners to sell their homes for a fair price and fast. This is the only option that will guarantee a sale and one that can complete in as little as seven days. The cash offer we make will be slightly lower than the market value of a property, but when all the costs involved in a traditional house sale are taken into account, there is little difference in the amount you will walk away with. Take a look at some example figures. Once the proceeds from the sale are in your account, you can use them to repay the mortgage lender and any funds left over can cover the cost of purchasing a more affordable home or moving into rented accommodation.
What Other Options Do I Have?
If you’ve only just fallen into arrears, the first step should be to contact the lending company and try to agree to an alternative short-term repayment plan. This arrangement would allow you to make smaller payments for a fixed period. Under the Mortgage Conduct of Business (MCOB) lenders are required to consider any reasonable proposals for repayment. If the current financial situation is temporary, a short period of reduced payments may enable you to repay what you owe and get back on track.
It might also be possible to claim under a mortgage payment protection policy if you have one. If you’re struggling to make repayments due to a job loss or illness, this type of insurance might cover the cost of mortgage repayments until you find new employment or are fit for work.
If your circumstances have changed, it is worth contacting the local benefits office to find out if you are eligible for any government support, such as Support for Mortgage Interest (SIM). The Citizens Advice Bureau can also provide advice about the support that may be available.
If you plan to stay in the property, earning some extra cash by taking in a lodger or renting out the garage could be another option. Even if it’s not your preference to share your home in the long-term, these options could provide a temporary solution to a cash flow issue.
If you’ve fallen behind with mortgage repayments, it’s best to be proactive and speak with the mortgage lender. They are required to consider any reasonable proposals for repayment and there may be a way to overcome a temporary financial situation that allows you to stay in the property. If your circumstances have changed and the mortgage repayments are no longer affordable in the long-term, using a house buying service to get a guaranteed quick sale could provide the funds necessary to clear the debt and start again.