How to sell a house with mortgage arrears
Being in mortgage arrears over an extended period can seriously damage your credit score and in the worst case scenario, lead to your home being repossessed. You may be able to negotiate a plan you can afford with your mortgage lender or you might want or need to sell your property quickly for cash.
Getting into mortgage arrears and its effect
The effects of missing your mortgage payments can be insidious. Missing even one can dramatically affect your credit score and the repossession process will begin and not stop until either payments have been made, you have agreed a repayment plan with your lender which you can stick to, or your home is repossessed.
The stress and anxiety this can cause can not be underestimated. The fact you've gone into arrears in the first place suggests financial distress, meaning there is a reason you haven't made the most important payment you have each month. This can be loss of your job, an illness, an unexpected sudden expense or change of circumstances etc. or just financial mismanagement.
Whilst the circumstances may not be your fault, neither are they the lender's and ultimately you made a legally binding financial commitment to make these payments, no matter what, every month. Products like life assurance and critical illness cover exist to protect you from exactly this scenario. If you have either of these and fall ill in theory, your mortgage payments should either be covered or your mortgage even paid off.
If you don't have these and you fall into arrears for any reason, the mortgage company first has a legal obligation to work with you to try to agree a payment plan so you can keep your home. This will still negatively impact your credit score but it's better than being repossessed!
If this isn't possible or you don't stick to the payment plan, your home may be repossessed. This is the worst case scenario for both homeowner and lender. The homeowner loses their home, has a repossession on their credit record meaning they'll struggle to even rent a house in future. For the lender they end up with a house they now have to sell to try to recoup the money they've lent you. This is absolutely not the position they want to be in and will do their best to avoid it, but they ultimately will get their money back somehow.
A way out
If you find you find yourself towards the end of this process and are feeling understandably scared, stressed and rather desperate, there is help and ways to avoid facing repossession. Cash buyer companies can buy your house very quickly, within 7 days sometimes, which will then allow your mortgage to be paid off before you're repossessed. Once mortgage lenders know you're selling to a cash buying company, they will normally let the sale go through rather than repossess. If things are even more advanced, some cash buying companies can take over your property before you move out and immediately start paying the mortgage lender and all of your bills, using a power of attorney. They will then look to sell the property whilst you're still in the property, at the end of which, you've avoided being repossessed, your lender has been paid helping to start to repair your credit score, and you'll still get any equity left over at the end, less the costs of paying your bills for however long that process takes.
These options do mean you'll get less than you would on the open market, as the cash buyer companies will only pay up to 85% of market value, but you'll be relieved of the incredible stress and pressure that anyone in mortgage arrears is under.
I hope you never find yourself in this situation, but if you do, OfferPal can search the best British cash buyer companies and get you cash offers to compare and help you pick the right option for you.