Selling your home voluntarily
If you have problems paying your mortgage, you may decide to sell your home. However, it's important to keep paying as much of your mortgage as you can until you have sold it. This page explains your options.
Why sell your home?
- Price - you are likely to get a much better price for your home if you sell it yourself. Your lender will probably sell it at a lower price
- Time - if your lender repossesses your home, they may not sell it for a while; meanwhile, your mortgage debt will continue to go up
- Not empty - your home could decrease in value if it is left standing empty, waiting to be sold by the lender.
Controlling your arrears
If you are thinking of selling your home, it is still important to continue to pay as much as you can towards your mortgage (and any arrears, if possible). If you don't pay, your lender may start legal action to repossess your home. If this happens, you may have to pay expensive legal fees (for yourself and your lender) on top of everything you originally borrowed.
Selling may take a long time, so it may be difficult to keep up your monthly payments until the sale is completed. If you have problems keeping up with your payments, an adviser may be able to help you to come to an arrangement with your lender.
Getting a valuation
To find out if selling your home will bring in enough money to pay off your debts, you will have to get your home valued. Many solicitors and estate agents provide free valuations, which tell you how much your home is likely to sell for.
The difference between what your home is worth and how much you owe on your mortgage is called the equity. If your home is worth more than the amount you owe, it may make negotiating with your lender easier. If it is worth less than what you owe, you will have negative equity. This might be the case if:
- property prices have fallen since you bought your home, or
- you have large mortgage arrears, which mean that your total debt adds up to more than the current value of your home.
If you have negative equity and you sell your home, you will still have to repay the full amount that is outstanding on your mortgage. Your lender can take legal action against you to get back any unpaid debts, even after the property is sold.
Getting permission to sell
If the money from the sale isn't likely to pay off your mortgage, you normally need your lender's permission to sell your home. It may be easier to get this if you can show them plans to convince them you can realistically pay off everything you owe. If you took out a mortgage indemnity guarantee (higher lending charge) when you bought the property, your lender can claim any shortfall from the insurance company, but the insurance company can then claim the money from you.
If you have used your home as collateral (a 'guarantee') for any other secured loans, you may also need permission from the lender who provided them.
Contact an adviser who may be able to help you to negotiate with your mortgage lender or other creditors. It may be possible to argue that selling privately will allow you to pay off your debts more quickly than if your home is repossessed. If you still can't get permission to sell, it may be possible to get a court order allowing the sale to go ahead. An adviser should be able to tell you whether it is worth trying this, and how much it might cost. Use the Money Advice Scotland website or the Advice Services Directory to find an adviser in your area.
If your lender decides to go ahead with court action to repossess your home and won't give you permission to sell your home privately, contact an adviser immediately. You may be able to get an order from the court preventing or delaying repossession to give you time to sell your home or to repay the arrears. If you have a buyer, you may be able to argue that your lender is being unreasonable and that you are more likely to be able to clear your debts if you sell your home yourself.
Costs of selling
If the value of the property has increased since you bought it and it is not your main home (for example, if it has been rented to tenants), you may have to pay capital gains tax when the sale is completed. This can be expensive.
Will the sale affect my benefits?
If you are on income support or income based jobseeker's allowance, any money you get from the sale after your mortgage has been paid off may be counted as capital, and your benefits may be reduced or stopped. It is important to inform JobcentrePlus, the disability benefits centre, the Pensions Service and your local council when you sell your home or you could be paid benefit that you are not entitled to and have to pay this back.
Finding somewhere else to live
If you decide to sell your home, you need to find alternative accommodation that you can afford. This could be through: