Before deciding to sell your home to pay for mortgage arrears, try to keep making mortgage payments and look at other options.
Explore your options before selling your home
If you are in arrears with your mortgage, don't rush into a decision about selling your home.
There may be other ways you can deal with mortgage arrears. For example you could:
- negotiate with your mortgage lender to delay or prevent repossession
- make changes to your mortgage terms or mortgage provider
- claim support for mortgage interest
- take in a lodger
Get a valuation on your home
Find out the market value of your home. This can help you decide if selling is the right option.
Many estate agents provide free valuations. These tell you how much your home could sell for. This helps you work out if selling your home can pay off your debts.
Consider the costs of selling your home
There are costs involved in selling your home. You have to pay some of the costs involved before the sale is final.
Keep up your mortgage payments
You must continue to pay as much as you can towards your mortgage.
If you don't make mortgage payments, your lender may decide to take you to court to repossess your home.
Contact your mortgage lender if you'll find it difficult to keep up with your mortgage payments until you complete the sale of your home. They may agree to accept reduced payments until the sale is complete.
Get advice from an adviser if you need help with this.
Get advice about homelessness
Get advice before you sell your home if you're going to ask the local council for help because you will be homeless.
In some situations, a council may decide that you are intentionally homeless if you lost your home because you didn't pay your mortgage.
Get advice if the council says that you are intentionally homeless.
Selling a home with negative equity
You have negative equity if the value of your home is less than what you owe on your mortgage or other loans secured on your home.
You usually need your lender's permission to sell your home if the money from the sale won't be enough to pay off your mortgage.
When you sell a home with negative equity, you still have to repay the full amount that is outstanding on your mortgage.
Your lender can take legal action to recover unpaid debts even after the property is sold.
If you have a mortgage indemnity guarantee, your lender can claim any shortfall from the insurance company. You will then owe the insurance company for what they paid out.
Get advice if you can't get permission to sell for any reason. An adviser may be able to help you negotiate with your mortgage lender or other creditors. It may also be possible to get a court order allowing the sale to go ahead.
Beware of companies offering a quick sale
Sale and rent back companies buy homes and then rent the homes back to their former owners.
You will be offered less than the market value for your home through a sale and rent back scheme. The tenancy you get won't give you the right to live in your home for the rest of your life. You can usually be evicted quite easily after 5 years.
Find out about sale and rent back schemes.
Benefits and tax after you sell your home
If you claim universal credit, income support or income-based jobseekers allowance, any money you get from the sale after your mortgage has been paid off may be counted as capital. Your benefits could be reduced or stopped.
You must inform Jobcentre Plus when you sell your home. If you don't, you will probably have to pay back any benefits that you weren't entitled to.
You may have to pay capital gains tax when the sale is completed if your home increased in value since you bought it and it is not your main home.
Find out more about benefits from Gov.uk.
Find somewhere to live
You will need to find a new place to live if you decide to sell your home. Your options could include renting from a private landlord or buying a cheaper property.
Find out more about finding a home after repossession.
Get advice if your lender starts court action
Get advice immediately if your lender decides to take court action to repossess your home and won't give you permission to sell your home privately.
You may be able to get an order from the court postponing the repossession of your home to give you time to sell your home. You must give the court proof of the steps you've taken to sell.
Contact the Civil Legal Advice helpline on 0345 345 4 345. You may be able to get help from a legal aid lawyer if you claim certain benefits or have a low income.
Have the papers you received from the court with you when you speak to an adviser.
Last updated 02 Jul 2015 | © Shelter
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