Mortgage shortfall debts after repossession

You still owe money to your lender or mortgage indemnity insurer if the sale of your home does not pay off your mortgage debts.

Debt after a repossessed property is sold

Your lender will contact you to ask how you plan to repay the debt if the sale has not cleared the debt.

They may take further legal action to get back the money you owe.

Alternatively they may pass your debt on to a debt recovery company. 

Mortgage indemnity insurance

If you have mortgage indemnity insurance, the insurance protects the lender not you.

The insurance company makes a payout to your lender to cover the shortfall. The insurer will probably ask you to repay them.

Time limits for court action

If the court made a money judgement at the repossession hearing the lender can take steps to enforce this. 

The lender has 12 years to start any legal action to recover the debt if the court did not make a money judgement.

They must notify you that they intend to take this action within 6 years of the sale of your home. 

Get debt advice immediately if a mortgage lender, debt recovery company or mortgage indemnity insurer contacts you about the mortgage shortfall.

Do this before you respond to the company.

Repayments of mortgage debts

Your options could include:

  • a lump sum payment as a full and final settlement 

  • paying off the debt in instalments over an agreed period

  • asking your lender to write off all or part of your debt

  • bankruptcy

A debt adviser can help you to work out the best way to deal with your debt and negotiate with the company.

Lump sum payments

Your mortgage lender might agree to accept a lump sum payment as 'full and final settlement', even if the amount you offer is less than you owe.

Paying by instalments

Your lender may allow you to pay off all or part of your debt in regular instalments over a number of years. 

If you do this, your lender could be willing to write off part of the debt.

Do not to agree to pay more than you can realistically afford.

Writing off a mortgage debt

You can ask your lender to write off all your debt. They probably will not agree to this, unless it's unlikely that your situation will improve.

Your lender might agree to write off part of the debt if you can repay the remainder through a lump sum payment or regular instalments.


Depending on your situation, you could apply for bankruptcy.

If you apply for bankruptcy, any assets you have can be used to pay off your debts. Bankruptcy usually lasts for a year.

After this time, most of your remaining debts are written off and you will probably be discharged from bankruptcy.

Bankruptcy makes it difficult to get loans or credit in the future.

Last updated: 5 November 2019

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