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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.

Money you still owe after the sale of your home is sometimes called mortgage shortfall debt.

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 it.

They might:

  • take legal action to get back the money you owe

  • 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. 

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

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

Get debt advice quickly 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 of money you offer is less than what you owe.

Paying by instalments

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

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

Do not 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: 11 December 2023

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