Selling your property to clear mortgage debts
If you're struggling to pay your mortgage, check if there’s another way to pay your mortgage debts and stay in your home.
If you can't find any other way of clearing your mortgage debts, you might want to think about selling your property. This would give you a lump sum of money which you could use to pay off your mortgage. If you have enough left over, you may also be able to use it to pay off other debts.
If you can't pay your mortgage, you may be tempted to:
- just leave the property and hand back the keys to your mortgage lender, or
- do nothing about your mortgage debts and wait for your mortgage lender to go through the courts and get you evicted from your property.
However, if you really have no other options for paying your mortgage, it would be better to try and sell the property yourself, rather than hand back the keys or do nothing.
This is because, you will still be responsible for mortgage payments, buildings insurance and other costs until the property is sold. Once the property is sold, your mortgage lender is likely to get a lot less for it than you would. Properties where the owner has been evicted (called repossessions) or the keys have been handed back to the lender often sell for a lot less. This could mean that the sale wouldn't bring in enough money to cover what you owe and you would still have a debt to pay. Also, lenders often sell at auctions where sale prices tend to be lower.
If you hand back the keys or get evicted, you will need to think carefully about where you're going to live. For more information about this, see Finding somewhere else to live.
For more information about what happens to your property after you've been evicted or handed back the keys, see Eviction for mortgage arrears.
If you’re thinking about selling your property, there are several things you will need to sort out and think about. These include:
- finding somewhere else to live
- getting a valuation to see whether the selling price will cover the mortgage and any repayment debts. If it doesn't, you will need to get permission from your lender to sell the property
- thinking about whether the money from selling the property will be enough to re-pay what you owe on the mortgage. If it isn't, you'll have to make up the difference
- thinking about how long it would take to sell the property and the costs involved, for example, estate agent's and legal fees. Until the property is sold, you will still be responsible for the mortgage payments and your mortgage debt may go up
- thinking about what income you’ll have to live on after you sell. If you’re not working and you get a lump sum from the sale of the property, this might affect whether you can get benefits or not.
If you are already claiming or think you might need to claim benefits, you should get advice before selling your property to pay off your mortgage debts. You can get advice from your local Citizens Advice Bureau. To search for details of your nearest CAB, including those that can give advice by email, click on nearest CAB.
If the money from the sale of the property is not enough to repay what you owe, you will have to pay the difference. This is called a shortfall.
If you have a government loan called ‘support for mortgage interest’, this won’t be part of the shortfall. The government will cancel the loan if you don’t have enough money to pay it back.
Your mortgage lender will send you a bill for the shortfall on your mortgage. You might also get a bill from another lender if you have another loan secured on your home - like a remortgage. If you are unable to make an arrangement to repay it, your lender may go to court to force you to pay this amount.
In most cases, there is a time limit for your lender to take action to recover a shortfall. The question of time limits for the recovery of a mortgage shortfall can be complicated and it's best to get advice.
If you don't pay off the mortgage shortfall and then buy another property, the lender of your first property may take court action against you. If they get a court order against you and you don't pay up, they could then apply for a charging order against your new property. This means that, when you sell the new property, the proceeds of the sale will be used to repay the shortfall. It is also possible that your lender could get an order for sale of your new home to repay the debt on the previous one.
If you owe a shortfall on your mortgage after you have been evicted for mortgage arrears, you should get expert advice. You can get advice from a Citizens Advice Bureau. To search for details of your nearest CAB, including those which can give advice by email, click on nearest CAB.
If you have other debts besides a mortgage shortfall, you may decide that bankruptcy is the best option for you. If you apply for bankruptcy, you will be able to include the shortfall in your bankruptcy order.
For more information about bankruptcy, see Help with debt.
If you're selling your property to clear your mortgage debts, you will need to think about where you are going to live.
If you don't have anywhere else to live, you may be thinking about applying to the Northern Ireland Housing Executive (NIHE) to be re-housed as homeless. You will need to talk to NIHE as soon as possible about this because in some circumstances they will consider you to be intentionally homeless and may not agree to re-house you. This also applies to people who have handed back the keys to their mortgage lender.
If you think you're going to be homeless once you've sold your property, you should get advice from an experienced adviser. Your local Citizens Advice Bureau will be able to help. To search for details of your nearest CAB, including those which can give advice by email, click on nearest CAB.
For more information about finding somewhere to live, including applying to NIHE for help, see Finding accommodation.