Falling into mortgage arrears is unavoidable for some.
When it comes, what you do next is important.
One of these options is selling your house.
Read on to find out the pros and cons of doing this.
What are mortgage arrears?
You fall into mortgage arrears once you miss a mortgage payment.
Your lender won’t take repossession action after one missed payment.
In fact, they’ll typically have a grace period of around 10 to 15 days. If you pay the missed payment in this period, it won’t count as a late payment.
How many months of mortgage arrears before repossession?
It takes three months of missed mortgage payments before lenders will take action to repossess a house.
Repossession is a last resort for most lenders and one or two missed mortgage payments won’t result in repossession.
If you’ve only missed one or two payments, you will still be in arrears. However, you can work with your lender to devise a solution.
Can I sell my house with mortgage arrears?
Yes, you can sell your house even with mortgage arrears.
Before repossession
If you are in arrears and sell your house before it is repossessed, you avoid having a house repossession on your record and can pay off any debts incurred.
You can release some of the equity and any leftover cash can be used towards a more affordable property or rent if you need to.
After repossession
If your house is repossessed, your lender will likely sell it at an auction so that they can regain the debt you owe them
Typically, repossessed houses at auctions are sold for a much lower price. If this isn’t enough to cover the arrears, you’ll still be responsible for paying it off.
So, avoiding repossession is key to securing yourself some financial stability and avoiding any further debts.
Is a mortgage paid in arrears?
Yes, unlike most other purchases or other housing situations such as renting, your mortgage payments are made after the fact.
For example, if you pay your mortgage on the first of each month, you are paying for the previous month. Whereas, if you were renting, your payment on the first of the month is usually for that month.
You fall into mortgage arrears once you miss one payment, as you haven’t provided payment for the previous month.
Before the grace period (10 – 15 days)
Your lender won’t take repossession action after one missed payment. In fact, they’ll typically have a grace period of around 10 to 15 days. If you pay the missed payment in this period, it won’t count as a late payment.
After the grace period
Once you’ve gone past the grace period, a late fee will often be applied, which is usually around 5 to 10% of your monthly mortgage payment.
If you’re struggling to pay this, you must contact your lender straight away. If you’re struggling to pay because of a temporary difficult situation, they can often help you out.
If the situation isn’t temporary, selling your house is a good way to avoid repossession and pay off any debts.
After three months
Once you’ve missed three months of mortgage payments, your lender can start action to repossess your home.
Contacting your lender before this period or taking action to sell your home before or around the three-month mark is key to preventing any further financial issues.
Contacting your lender
If you think you will missing mortgage payments, contacting your lender as soon as possible. They are usually keen to provide help in these circumstances – after all, they want to get paid…
Checking in with your lender is key in this situation as they can usually offer you a solution if your financial problems are temporary.
Communicating with them and making it clear how much you can currently pay, and how much you’re willing to repay your mortgage payments, will help them work with you to come up with a solution.
Your lender could provide several solutions such as switching to an interest-only mortgage or adding your arrears to the mortgage.
Consolidating your debts
Debt consolidation means combining your debts. The advantage of this is the simplicity for paying and the lower interest rates.
Renting out a room
Another solution you might consider is renting out a room or part of your house.
You can start making money through this avenue fairly quickly if you advertise on online marketplaces. Just make sure you carry out your due diligence to keep you and your home safe.
Selling your house
If you can’t come to a workable solution with your lender, you may want to sell your house as fast as you can.
Selling a house can often seem like a lengthy and complicated ordeal but in lots of cases, selling a house fast suits both the buyer and seller.
Sell your property with We Buy Any Home
We Buy Any Home are chain-free cash house buyers who can help you to sell your property fast.
Using our own funds, we will purchase your property at a set price, by a date of your choosing, fully managed from beginning to end.
If you want more guidance on preventing house repossession, then you have come to the right place.
Fill in our enquiry form below if you are interested in getting a cash offer for your house.
