Can I Sell My House With Mortgage Arrears?

Mortgage arrears are a serious concern for many homeowners, especially when the payments start to stack up — and with rising cost of living and interest rates of recent years, more and more of us are feeling the pinch. 

The pressure from lenders can feel intense. In fact it might feel like you may have no choice but to borrow from family or friends to make up the shortfall. But if you’re wondering if you can sell your house with mortgage arrears, the answer is yes. And in fact, selling your home could be a solution that allows you to pay off your debts and avoid repossession. Here’s what you need to know.

Mortgage arrears — what do they really mean, and what can you do about them?

Mortgage arrears crop up when you miss one or more payments on your mortgage. You fall into mortgage arrears once you miss one payment, as you haven’t provided payment for the previous month. Thankfully, your mortgage lender won’t take repossession action after one missed payment — they’ll typically have a grace period of around 10 to 15 days. Your payment won’t be considered late if you pay during this time.

While missing a payment is a serious issue, it doesn’t mean your home is at immediate risk. Lenders are legally required to work with you to resolve the situation rather than go down the route of repossession. But don’t wait for them to take the first move, because the sooner you act, the more options you’ll have.

Many people aren’t aware that selling their home is a viable option when they’re in arrears. You could use the proceeds of the sale to pay off the mortgage and any outstanding debts. The big question is, how fast do you need to move? The answer depends on your financial situation and the level of pressure from your lender.

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. If you’ve only missed one or two mortgage payments, you will still be in arrears, however you can work with your lender to come up with a solution. Lenders are usually keen to help as they want to be paid so contacting them as soon as possible is the best first step to take as soon as you have missed a payment.

Communicating with your lender and making it clear how much you can currently pay, as well as how much you’re willing to repay for your mortgage payments, will help them come up with a solution that suits you. Possible solutions your lender could suggest include switching to an interest-only mortgage or adding your arrears to the mortgage as payment. These are ideal if your financial problems are temporary.

If you have an ongoing financial problem you might consider renting out a room or part of your house to a tenant. Advertising on online marketplaces means you should be able to find a tenant fairly quickly, and the extra money you make from rent can then be used to help with mortgage payments. Ensure that you keep your home safe by carrying out the necessary checks on potential tenants.

If you can’t come to a workable solution with your lender or you’ve missed too many payments and you’re worried your house may be repossessed, you may want to sell your house fast to pay off your debt.

Could selling up be a smart move?

Selling your home when you’re in arrears can be a proactive step to regain control of your finances. In some cases, it could mean avoiding the severe consequences of repossession, which can damage your credit score and make it harder to get back on your feet. It can enable you to clear your arrears payments and start fresh without a debt cloud over your head.

The real challenge here is figuring out exactly how to sell, so let’s review your options.

Option 1: Selling on the open market

Selling your home through a traditional estate agent is one option to consider. If you’ve got plenty of equity in the property, the sale could cover both your mortgage and the arrears. This approach works well if the market is on your side, but it’s not without its risks.

The open market can be unpredictable. Even in a seller’s market, it may take time to find the right buyer, especially if your home needs any repairs or is part of a chain. During this period, you’re still responsible for the mortgage, which could mean accruing further debt. Plus, estate agents will take a fee, and depending on your situation, you might not have time to wait.

Option 2: Sell to a cash buyer

If you need to sell quickly, working with a cash buyer like SellHouseFast.co.uk can make a world of difference. Cash buyers are often able to complete the sale within weeks, helping you to avoid further arrears and the risk of repossession. This option is particularly appealing for those who need to move fast and don’t want to deal with the usual delays that come with chains, mortgage approvals and drawn-out negotiations.

One of the biggest advantages of selling to a cash buyer is certainty. Once the offer is made and accepted, there’s no waiting around for a buyer’s mortgage to come through, no risk of the chain collapsing and no last-minute complications.

This option also works well if you’re selling a property with tenants, as some cash buyers (like us) are happy to buy properties with tenants in place.

Option 3: Exploring a short sale

If your home is worth less than the mortgage balance, you might be facing negative equity. In this case, a short sale could be an option. A short sale allows you to sell the home for less than the outstanding mortgage, with your lender agreeing to accept the reduced amount as full payment.

However, short sales aren’t guaranteed and require your lender’s approval. While this route can help you avoid repossession, it’s important to know that your credit score may still be affected. Short sales are often seen as a last resort when other options, such as selling on the open market or to a cash buyer, aren’t viable.

Taking the next step

If you’re in mortgage arrears, selling your house could be the best way to clear your debt and avoid repossession. The key is to weigh up your options and then take swift action.

We understand that dealing with arrears can be stressful, but we’re here to help. We’re a cash house buyer, and we offer a quick, no-hassle way to sell your home. So, why not get a free, no-obligation quote today and see how we can help you move forward with confidence.