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Selling your home to pay your mortgage debts

This advice applies to Scotland

If you're struggling to pay your mortgage, check if there’s another way to pay your mortgage debts and stay in your home

You might want to think about selling your home if you can't find any other way of clearing your mortgage debts. 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 might be able to use it to pay off any other debts.

Talk to an adviser

Before making any decisions about selling your home, you should consider getting independent financial advice.

You can also get advice from a Citizens Advice Bureau

Don't just hand back the keys or wait to get evicted

If you can't pay your mortgage, don’t just:

  • hand the keys back to your mortgage lender - this is called voluntary repossession and should be a last resort

  • wait until you get evicted - your lender could take you to court to repossess your home.

If you have no other way of getting money to pay the mortgage arrears, it would be better to try to sell the property yourself, rather than handing back the keys or waiting to get evicted.

If your lender asks you to hand back the keys 

If your lender asks you to give up the keys, you don’t have to do this. If your lender wants to repossess the property, they still have to get a court order before they can evict you. 

Read more about what happens if your lender takes legal action.

Who pays the bills if you choose voluntary repossession

Even if you leave the property and give the keys back to the lender, you’ll still be responsible for all the costs until the property is sold. These costs might include mortgage payments and buildings insurance. 

You only stop being responsible for these costs when the lender sells the property. This can take a long time if it’s empty. 

If you hand back your keys and your property is sold at auction, your lender is likely to get a lot less for it than you would on the open market. Properties where the owner has been evicted or the keys have been handed back to the lender also often sell for a lot less. This could mean that you still have a debt to pay.

If you have to sell your home

Before you sell your home, you should check if you’re eligible for a scheme that would help you stay in your home.

You should also get help from an experienced money adviser.

Getting a valuation

You should get a valuation to see if the selling price will cover the mortgage and any mortgage debts. 

If you’re not going to get enough money from the sale, you’ll have to negotiate with your lender because they might not be prepared to release the property for sale.

If you’re on benefits 

If you’re on benefits, you should get advice about what to do if you’re going to have a lump sum left over. You can get advice from a Citizens Advice Bureau

If the money from the sale doesn’t cover what you owe 

If the money from selling the property isn’t enough to repay what you owe, you’ll have to pay the difference. This is called a shortfall.

The lender will send you a bill for the shortfall. If you can’t make an arrangement to repay it, your lender might go to court to force you to pay this amount. 

If your mortgage shortfall debt is large and you can only afford small payments, or none at all, you should tell your lender. You should get advice to help you do this. 

In most cases, there’s a time limit for your lender to take action to recover a shortfall. Time limits for recovering a mortgage shortfall can be complicated, so you should get advice at a Citizens Advice Bureau.

There’s more information about mortgage shortfalls on the National Debtline website.

If there’s a shortfall and you buy another property 

If you don't pay off the mortgage shortfall and then buy another property, the lender of your first property might take court action against you. If they get a court order against you for the debt and you don't pay up, they could then apply for a court 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. 

Finding somewhere else to live

If you're selling your property to pay off your mortgage debts, you’ll need to think about where you’re going to live.

If you plan to rent a home, check what to think about when finding a home to rent

Asking the local council to rehouse you

If you’re going to apply to the local council for housing as a homeless person, you shouldn’t hand back the keys without checking with the local council first. In some circumstances, they will consider you to be intentionally homeless and might not agree to re-house you.

If the local council doesn't agree to you handing back the keys, you should wait until the court has granted a possession order before leaving your home. 

Read more on help you can get if you’re homeless or at risk of becoming homeless.

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