Selling your property to help pay off your mortgage debts
If you're struggling to pay your mortgage, you might be thinking about selling your property. This would give you a lump sum of money which you could use to pay off your mortgage.
You’ll still be responsible for mortgage payments, buildings insurance and other costs until your property is sold.
If you think you’ll have money left after the sale, you should think about if this will affect any benefits you currently get.
You should also think about where you’re going to live once you’ve moved out. If it’s not possible to stay with friends and family, it can take a while to find housing - you might need to apply to your local council for housing help.
Check if there's another way to pay your mortgage debts
You might be able to make changes to your mortgage so you can stay in your home. For example, you might be able to:
change the terms of your mortgage
get help from your local council through a mortgage rescue scheme
take out a loan against the value of your property
If you’re thinking about handing back the keys to your mortgage lender
It’s better to sell the property yourself through an estate agent. You shouldn’t hand back the keys to your mortgage lender or wait to be evicted.
This is because if your mortgage lender has to sell your property, they’re likely to get a lot less money from the sale than you would. This could mean you don’t make enough money to pay your mortgage debts.
If you don’t have anywhere else to live, it can also take a while to find housing. If you need to apply to the council for housing, you’ll need to do this before you move out of your property.
Check how much money you'll get from the sale
If you’re thinking about selling your property, you’ll first need to get your house valued - most estate agents will do this for free. You’ll need to check if the sale will cover your mortgage and any repayment debts.
If the sale of your house won’t be enough to pay off your mortgage and any repayment debts, you’ll need to get permission from your mortgage lender to sell the property.
Check your lender’s website for their contact details. Ask them if they want you to put your request in writing, or if there’s a form to complete.
If your lender says you can't sell your property
You should first complain to the Financial Ombudsman Service. If they think your lender didn’t act fairly, they can order them to let you sell your property.
You can also apply to the court for an ‘order for sale’. This is a court order that allows you to sell the property.
It can be complicated and expensive to get a court order - you should talk to a solicitor before you apply to the court.
Work out how much it will cost to sell your property
You should also think about the costs involved in selling your property - for example, the estate agent’s and solicitor fees. These costs are usually taken out of the sale of the property, but a solicitor could ask for some of their fee to be paid in advance.
You should talk to different solicitors to check:
how much they charge
when you’ll need to pay them
If you currently get benefits
Your benefits could be affected if you have a lump sum left over after you’ve paid back your mortgage and any other repayment debts. For example, you might not be able to claim any income-related benefits like Universal Credit or Housing Benefit.
The amount that will affect your benefits will vary - and will depend on things like your savings or any other assets you have.
If you think you’ll have money left after you’ve paid off all your debts, you should get advice before selling your property. Talk to an adviser.
If you still owe money after the property is sold
If you don’t get enough money from the sale of your property to pay back what you owe to the mortgage provider, you’ll have to pay the difference. This is called a ‘shortfall’.
Your mortgage lender will send you a bill for the shortfall on your mortgage. If you’re unable to make an arrangement to repay it, your lender might go to court to force you to pay this amount.
Your lender will usually have a time limit to go to court to make you pay the shortfall. This can be complicated and it's best to get advice.
If you think you’ll still owe some of your mortgage after you’ve sold your property and will struggle to pay it back, you should talk to an adviser.
If you have other debts
You should work out which debts to deal with first.
If you think you won’t be able to pay off all your debts, you might be able to:
get a debt management plan
get a Debt Relief Order (DRO)
apply for bankruptcy
If you apply for bankruptcy, you’ll be able to include the mortgage shortfall in your bankruptcy order. You can also include the mortgage shortfall in a DRO - as long as the total amount of all your debts isn’t over £30,000.
If you have a government loan called ‘support for mortgage interest’ (SMI), this won’t be part of the shortfall. The government will cancel the SMI loan if you don’t have enough money to pay it back.
Finding somewhere else to live
You’ll need to think about where you’re going to live after your property is sold.
It might be difficult to rent privately if you’ve got a CCJ, IVA or bankruptcy in your name. This is because your letting agent and landlords will be able to see these on the bankruptcy and insolvency register.
You should check if there are any other options - for example, staying with a family member or friend.
If you don't have anywhere to live
You might be able to get help from your local council.
One of the things the council will look at is whether you caused yourself to be homeless - this is called being ‘intentionally homeless’.
The council will look at whether you could afford the mortgage when you bought your home, and why you can’t afford it anymore.
Adolygwyd y dudalen ar 26 Mehefin 2023