Selling a house with mortgage arrears

Quick Navigation

Use the guide below to learn about mortgage arrears, including a simple definition of what they are, and what some of the options homeowners have for resolving such a debt. If you’d like to sell your home with mortgage arrears, the guide also offers advice for the various methods of selling.

1. What are mortgage arrears?
2. How common is it for a homeowner to have mortgage arrears in the UK?
3. Attempting to obtain financial support to resolve your mortgage arrears
4. Selling your house or flat to pay off mortgage arrears
5. What methods are available for selling a home with mortgage arrears?
6. Frequently asked queries about selling a house with mortgage arrears

What are mortgage arrears?

Arrears are monies that are owed, so if you have mortgage arrears it means that you have missed at least one of your monthly repayments on the loan that you took out to buy your current house or flat. When you sign for your mortgage, you are committing to a legally enforceable agreement that you will pay back the loan through set monthly instalments.

Mortgage arrears can happen for many reasons, for example if someone loses their job and are now unable to afford the monthly payments. But no matter the reason that led to the arrears, it’s in your best interest to try resolving the situation as quickly as possible even if it is a tenanted property. The lender will likely charge fees on late payments on top of the missing instalments. If you fail to make payments for several months this can leave you owing a lot of money and create some problems.

In worst case scenarios, mortgage lenders can initiate proceedings to repossess your home if you have falling far behind in meeting your monthly payments for your loan. Facing the threat of repossession can be an incredibly stressful experience that will occupy a lot of your time, and also may create additional costs if you hire a solicitor to help with possible eventual legal proceedings.

How common is it for a homeowner to have mortgage arrears in the UK?

UK Finance, which represents almost 300 financial industry firms, noted in a 2021 summary of the current state of mortgage arrears that within the last fiscal year there has been a slight increase in the number of homeowners who are behind in their monthly loan payments compared to the prior year, but the total still represents a relatively small percentage of all homeowners who have mortgages. This suggests that it is not uncommon for someone to have arrears on their home loan, but it does not affect a majority of homeowners.

The most important fact to know if you have mortgage arrears is that there is nothing to be ashamed about, as financial problems can affect anyone at any time.

And do not panic if you are behind on your monthly mortgage payments because you have a number of options for resolving your current predicament, along with plenty of free resources online to provide you with great advice on how to address your missing payments.

Attempting to obtain financial support to resolve your mortgage arrears

Just because you might have missed a few mortgage payments does not mean you’ll definitely lose your home, and you might be able to fix the issue before trying to find a buyer for your property.

An early step that you can take in a bid to fixing your mortgage arrears on your house or flat is to contact your lending company, particularly if you are only one or two months behind schedule on your repayments. Don’t automatically assume that lenders will immediately try to repossess your home, as they might be willing to work out a repayment schedule with you that will eventually clear the arrears and get you back on schedule with the regular monthly instalments. This means you could potentially have no arrears by the time you list your home for sale.

If you signed up for a mortgage protection policy with your lender, you could activate this if you are in arrears. It works like insurance by covering the cost of some mortgage instalments in specific circumstances, for example if you have a major illness or have lost your job. The payments are typically covered until the issue resolves, for example once you get a new job.

And you might be able to get help from advice charities and other organisations on possible government assistance to help you pay off the arrears, including Support for Mortgage Interest, the Mortgage Rescue Scheme, and other programs designed to help homeowners.

Selling your house or flat to pay off mortgage arrears

If it won’t be possible for you to use any of the options for paying off the mortgage arrears that will leave you with ongoing ownership of your house or flat, a possible step could be to sell your property as long as there is sufficient equity in the property. This should hopefully provide you with the cash necessary to not only clear your debt with your existing mortgage lender but also some funds to buy your next home.

Citizens Advice, the national charity that offers free and comprehensive advice to people in the UK on a broad range of issues, notes that the strategy of selling your home to both avoid repossession and clear your mortgage debt can work in many cases, although it might not work for some situations.

If you’re interested in taking this step, you should get a valuation on your property so that you can get an idea of how much you might be able to make by selling it. For example, you could contact a quick home buying company such as LDN Properties who can give you a no-obligation free cash offer for purchasing your house or flat. Take this value and calculate whether a sale at that price would give you enough cash to not only pay off the mortgage and your arrears but also give you funds toward any other debts or buying your next home.

Note that if you sell your home in an attempt to pay off your arrears but the cash profit you make is still not enough to resolve all your debts to your mortgage lender, this is called a shortfall. You will be liable in most situations for paying this off eventually to your original lender. These matters should be discussed with your lender.

What methods are available for selling a home with mortgage arrears?

Should you wish to sell your home as your strategy for tackling your mortgage arrears, you’ll usually have to choose between three different methods for selling your home: selling through a property auction, enlisting the services of a local estate agent, or asking a fast cash home buyer to make an offer on your home. You’ll find that each approach has certain benefits and cons depending on your situation.

Selling through a property auction

You might be considering selling your home at a property auction, and if so then the good news is that it can provide some certainty about selling because the date of the auction is typically when your house or flat will sell – if someone bids at least the opening minimum bid price for it.

But be aware that auctioneers might try to get you to set that price at a very low level so that the home attracts more interest from buyers, with the aim of having people try to outbid each other and increase the final sale price. This can be a great result but it’s not guaranteed, and there’s always the risk that you only get one bid and have to sell at the reserve price.

There’s also the chance that you could have to wait several weeks after listing your home for sale until the auction occurs. And once the auction is over, if your home has sold you may have to wait a few more weeks at least until the legal paperwork for selling your property is finalised.

Also, auctioneers will charge fees for their work which will reduce your total sale profit, which will lower the amount of cash you’ll have from the sale to pay off your arrears.

Enlisting the services of a local estate agent

A second option for selling your home to pay off mortgage arrears is selling through an estate agent. Benefits of using this method include that they’ll do most of the work in finding buyers for your home and showing them around the property on viewings.

But a major drawback for some homeowners is the fact that there are zero deadlines for the estate agent to find a buyer, and many properties remain unsold for months or even more than a year in some examples, which is far from ideal if you need a fast sale to pay off arrears.

And much like auctioneers, estate agents will make you pay commission once they sell your home. You’ll have to subtract this fee from the cash profit that you’ll receive from the sale, leaving you with less money that you can then use to pay your missing mortgage instalments.

Asking a fast cash home buyer to make an offer on your home

A third way that you can sell your house or flat even if you have arrears on your mortgage is to contact a fast cash buying company such as LDN Properties. They can give a straightforward zero-hassle and no-stress way to get a fair and speedy cash offer for selling your home.

One advantage of selling your home through this option is that quick cash buyers are generally able to complete the entire sale process, including exchanging contracts and paying the proceeds to you, all within just a few weeks of the time that you first contact them. This can be vital if you are looking for a very quick sale to pay off your arrears as fast as possible.

Another pro of using a cash home buyer is that they often do not charge any fees, which means you are guaranteed to receive the full profit from the price that they offer for buying your property. For homeowners struggling with arrears this is a crucial benefit because it means you will get as much cash as possible from the sale to use for paying off the debt to your lender.

Frequently asked queries about selling a house with mortgage arrears

Homeowners looking to sell quickly often have many questions, ranging from the stages of selling through to selling a home with mortgage arrears. Here are a few of the top questions we’ve been asked when looking to sell with mortgage arrears: