Are you considering voluntary house repossession?
Some people choose voluntary house repossession when they feel that they have no other option. Whether you’re behind with their mortgage repayments or worried about a sudden drop in income, this drastic step should always be a last resort.
Here are a few reasons why voluntary house repossession may not be the best way to escape your financial problems.
Voluntary house repossession doesn’t always solve your problems
There are still thousands of repossessed houses for sale in the UK. Many of them changed hands voluntarily at the behest of the previous owner to solve financial problems. But in many cases, those problems didn’t magically disappear.
Your lender will probably take steps to sell your home as quickly as possible. But until they do, the mortgage repayments will continue to add up. You’ll also be liable for any interest accrued during this period.
Repossessed houses sell fast because lenders list them at auction for way below their potential market value. If the price achieved isn’t enough to pay off your mortgage, your arrears and any interest you’ve accrued, you’re still liable for the shortfall.
Repossessed house auctions packed with bargain hunters look for distressed property sales. Voluntary repossession can result in a very unsatisfactory final sale price.
There might be tax and benefits-related consequences
If you’re lucky enough to cover the cost of your mortgage through voluntary repossession, you’re still not necessarily out of the woods. For example, if you’re left with a cash lump sum after the sale completes, you may lose some of your means-tested benefits and tax credits. You may also have to pay capital gains tax.
Your credit rating will be affected
It won’t matter to credit rating agencies that you signed up for repossession voluntarily. Your credit file will show that your lender repossessed your home. As a result, you may struggle to get a mortgage in the future. You may also experience difficulties when applying for small loans, credit cards and hire purchase agreements.
The repossession process might interfere with your ability to rent a home. Most letting agencies perform a credit check during the application process. If there’s a repossession on your file, you are often deemed too high a risk.
There are hidden costs involved
As well as mortgage repayments, arrears, and interest, your lender will also pass on the costs of selling your home. If the house sells at auction, you’re liable for the fees. Similarly, you’ll have to pay for legal fees, estate agent fees, energy certificates and anything else required during the house selling process.
Are there any alternatives to voluntary house repossession?
Yes, there are alternatives. The easiest thing to do is to contact your lender to discuss your options. You may be eligible for a repayment holiday, or the bank might be willing to freeze interest charges. There’s also the possibility of extending the mortgage term to reduce monthly repayments.
But if you’ve exhausted all your options, it may be time to consider selling your house to a property buying specialist. These companies buy homes fast, and for a competitive price based on current market conditions. There’s no marketing or negotiation involved, which means you can save precious time. Selling your home to SellPropertyFastCash could secure the funds you need to settle your mortgage within 28 days — without accruing many of the fees listed above.
If you’re struggling to keep up with your mortgage repayments, don’t pretend everything is OK. Take decisive action now, and you might be able to protect your financial future.