If your home is sold by the mortgage lender
After repossession your lender can sell your home to pay off your debt but the sale price might not cover all you owe.
Do I have to pay the mortgage until my home is sold?
Yes. If your home is repossessed or you hand over the keys to your lender, you will still be responsible for your mortgage payments until it is sold.
This will include:
- any arrears
- ongoing mortgage and interest payments
- buildings insurance
- penalty charges for missed payments.
Selling may take a long time, so the amount you owe could increase considerably even though you are no longer living in your home. Your lender shouldn’t delay the sale if doing so would mean that your debt would increase. Contact a debt adviser immediately if you are in this situation. They may be able to help you negotiate to keep penalty charges to a minimum.
The person or company who was given possession of your home has a responsibility to look after the property until it is sold. This includes dealing with essential repairs. It may also deal with basic maintenance, but doesn’t have to. Any costs involved will normally be added to your debt.
How will the lender sell the property?
Your home may be put on the market in the normal way, but some lenders sell repossessed properties at auction. Most will get at least one valuation to ensure they get a fair price, but it may not be as much as you would get if you sold it yourself. This is because your lender’s main concern is getting back the money you owe as quickly as possible.
Lenders have a legal responsibility to get the best price for the property that can reasonably be obtained.
If you think your lender has failed to get a fair price, you can complain to the Financial Ombudsman Service who will investigate how the property was valued and marketed.
Can I sell the property myself instead?
It may be possible to sell your home yourself, even after you have been evicted. You may want to do this if you think that the price your lender has accepted is too low. If you can show that you have received a better offer from a serious buyer, the courts may be willing to make an order allowing you to sell the property yourself (an order for sale). This will prevent your lender from selling the property for a limited amount of time. If you think this might be possible, contact a solicitor immediately or call the Civil Legal Advice Helpline on 0345 345 4 345.
What happens to the money from the sale?
When the property is sold, your lender is entitled to use the money from the sale to recover what you owe. This will include any outstanding debts and any money your lender has to spend when selling your home,
- legal fees
- estate agents’ and/or auctioneers’ fees
- bills for any repairs that are needed.
If you have other debts that were taken out with your home as collateral (such as a second mortgage), these creditors may be entitled to a share of the proceeds, but your debt to your mortgage lender will be paid first. Any money left over after everything you owe to your creditors has been paid will be yours.
If you are on means-tested benefits, any money you get from the sale will be counted as capital, and your benefits will probably be reduced.
What if the proceeds aren’t enough to cover my debts?
When your home is sold, the money from the sale may not cover everything you owe. This might be the case if your arrears are very large, or if the value of the property has fallen since you bought it (negative equity). If this happens, you will still be responsible for repaying the difference (the shortfall).
If you had to pay for mortgage indemnity insurance when you took out your mortgage, it will pay all or part of the shortfall to your lender. However, you are still responsible for the money and can be asked to pay it back after the property is sold. Your lender may take legal action on behalf of the insurance company, or the insurer can do so itself.
If you are facing long-term debts, you should get specialist advice. Contact one of the following organisations who may be able to help you: