If you’re at the point of asking the question ‘is voluntary surrender of your home better than repossession UK‘, please read on, as this is important. For me it’s a bit like asking whether it’s better to commit suicide vs being shot in front of a firing squad. Neither option is good in my opinion.
If you would like to know whether voluntary surrender is better than repossession, I’d say neither is better than the other. In fact both are bad.
Although both are bad, the only minor benefit a voluntary surrender has over a forced repossession is that you have more control over the voluntary surrender. But both are not good as far as obtaining credit in the future is concerned.
Going through a repossession will cause untold stress, you’ll lose your home, and you may end up having a mortgage shortfall (which the bank can force you to pay). You’ll end up homeless and have a terrible credit report to boot.
There are much better alternatives to both voluntary surrender and forced repossession.
Now that I explained more about what a forced repossession is about, lets review which is better.
As I expressed right at the beginning of this article, in my opinion a voluntary surrender of your home is no better than a repossession. With the only benefit I can see is that with the voluntary surrender you are slightly more in control of the process.
In both cases the following are the downsides of going through both voluntary surrender and a forced repossession:
- Stress of losing your home.
- The loss of most, if not all of the equity in your home.
- The need to find somewhere else to live.
- Badly damaged credit report.
- Possibility of facing a mortgage shortfall.
What does repossession mean?
Repossession is a process where your mortgage lender would take back possession of your home where you’ve fallen behind on your mortgage payments. And whilst mortgage lenders in the UK have to follow a strict pre-action protocol for repossessing a house, they are entitled to do so.
Repossession can be prevented and it can be stopped, but only if you take action. The first action you must take is to communicate with your mortgage lender. To be fair to mortgage lenders, they do not want to repossess homes. They would prefer to help you, but only if they can and you are prepared to work with them.
What does repossession mean on credit report
If you have your home repossessed, it will remain on your credit report for up to six years.
During the period where your credit report is affected by a repossession, you’ll struggle to obtain credit. But if you are able to obtain credit, it would be on unfavourable terms. This means that if you do manage to obtain credit, you’ll end up having to pay higher interest rates, as you represent a higher risk.
Banks and other lending institutions make lending decisions based on how great a risk you are. They consider the risk in terms of how likely it is you will default on a loan. The worse your credit report is, the greater the risk of a default.
How much does a voluntary repossession affect your credit?
There’s probably not much difference between a voluntary house repossession vs a forced repossession as far as your credit report is concerned. As already mention both are not good as far as obtaining credit in the future is concerned.
The only minor benefit a voluntary repossession has over a forced repossession is that you have more control the the voluntary surrender.
What are the alternatives to repossession?
You may be wondering what the alternatives are to repossession.
It’s also possible that you’ve already tried to sell your house, but can’t. You may be burying your head in the sand. Or you may feel you don’t have any other options.
Apart from the help you can obtain from organisations like Step Change Debt Charity or your local Citizens Advice Centre, we can help you to sell your house quickly. This will avoid any need to surrender your home voluntarily or avoid having to face repossession.
You may even get some cash back in your bank too, depending on how much equity you have left in your home.
Even if you only want to talk about your problem and what options might exist other than repossession, please feel free to contact us for a free and informal chat in confidence.
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