Can you sell your house with mortgage arrears?
Whether or not you can sell your house if you’ve fallen behind on your mortgage payments depends on whether you have any equity in your house. You ideally need to owe less on your mortgage than what your home is worth to be able to pay your mortgage lender back once you’ve sold.
Can you sell your home if you are behind in mortgage payments? Yes you can sell your house if you are behind on your mortgage payments. If you’re in negative equity this will make it difficult to sell as you’ll not be able to clear your mortgage off in full. You also need to be careful you don’t fall too far behind on your mortgage payments and get repossessed before you can sell.
Let me explain this further, by first explaining equity and negative equity. But please read to the end of the article, as there’s is still a solution to sell your home if you are behind on your mortgage payments and if you’re in negative equity.
What does equity mean vs negative equity
There’s a big difference between having equity in your house vs having negative equity.
Your home equity is the difference between the fair market value of your property, less what you owe on your mortgage and/or loans secured on your home.
Whereas negative equity means that the market value of your home has fallen below the outstanding amount of your mortgage or other loans secured on it.
With that said, let’s see how this works in practice.
Can you sell your home if you are behind in mortgage payments?
If you are behind in mortgage payments, which means you have mortgage arrears, you’ll no doubt have been written to by your mortgage lender. If you’re behind on your mortgage payments and you are in arrears, you’ll owe your mortgage, plus the arrears to your mortgage lender.
Being in arrears means that your mortgage company will commence the repossession process. It’s important to understand the repossession process. But it’s even more important to communicate with your lender.
For example, never ignore your mortgage lender. When they write to you, always respond in writing. They are looking to resolve the matter, as no lender wants to follow through on a repossession. But having said that, if you ignore them. Or if you fail to come to an agreement, they will repossess your home.
Explain to your lender you intend to sell your house to repay your mortgage and the arrears
When you write to your mortgage lender, you should tell them that you intend to sell your house. If you have already listed it with an estate agent, send your lender these details so they can see you are being proactive.
In addition to this, try to work out some form of deal with them in the interim of at least trying to pay something towards your mortgage. If you can’t ask them if it’s okay to have a repayment holiday (i.e. stop paying your mortgage payments for a short period).
By agreeing this will at least give you that breathing space to sell your home.
Avoid a short sale if you can
The alternative to you selling your home when you’re behind on your mortgage payments is do what’s called a short sale. But generally a short sale is only done where there’s no equity in the house. It’s usually at the stage where the home owner simply wants to legally walk away from their mortgage.
But if you can avoid this, it would be better for you in the long run. Your credit report will have been badly affected by going into arrears on your mortgage. But if you can work with your lender to resolve the problem, this can only serve to help.
Can you sell your home if you are behind in mortgage payments if you’re in negative equity
What if you are in negative equity, can you still sell your home if you are behind in mortgage payments?
This is a more trick situation. If you are in negative equity and you sell your house, you’ll not have enough money when you sell your home to repay what you owe to your mortgage lender.
On the basis that you are behind on your mortgage payments you are very unlikely to have sufficient savings to settle the difference between what your house sells for and what you owe. That is the negative equity portion.
But as hinted above, there is still a solution when you’re in this predicament.
More Reading: What Is Negative Equity (Negative Equity Example)
Mortgage babysitting agreement
If you are in negative equity. Plus you’re behind on your mortgage payments and in arrears on your mortgage. The solution is that we take over your property and agree with your lender to pay the mortgage on your behalf.
Of course the property becomes ours, but you resolve the problem with your mortgage lender. You’ll not be repossessed. Plus you remove all the stress involved in trying to sell you house.
This solution will also work if you are not in negative equity. If you can’t sell your house for what ever reason, this solution also works very well. It might be your house needs refurbishment, or it could be a very slow housing market. Whatever the reason you can’t get rid of a house that won’t sell, we can usually help you.
If you would like to have a friendly chat, please contact us as soon as possible. The sooner you look for solutions, the easier it is for us to help you.
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