You’ve got to that point when you think you really can’t continue any more. The financial pressures are too much and the mortgage payments are becoming an impossible burden. Perhaps you should consider selling your house back to the bank?
Hold on a minute there. Things may be bad at the moment but if you hand in the keys and walk away you may find that your hasty move increases rather than decreases your financial and legal problems. There isn’t an easy way out here where you can throw off your debt and walk away without consequences of some kind.
Your mortgage loan is a financial transaction guaranteed (‘secured’ in bank-speak) by your house. So the bank or mortgage company knows it can legally take your house and sell it if you default on your payment obligations.
However, selling your house back to the bank doesn’t mean your troubles are over. If the bank sells off your house quickly and gets a low price they may continue to pursue you for the difference between that and the mortgage. It is the mortgage loan, not the property that the bank owns and wants to get back. The mortgage continues to exist until it is paid off by whatever means.
The bank may also add solicitor’s fees, sales commissions and other expenses incurred before your house is sold. If the property takes some time to sell, you will be responsible for expenses such as the mortgage payments, house insurance etc. until the sale.
This all gets added to your debt and is still just as real even though your house is gone. The value of the house sale will be taken off your debt but if anything remains you are still liable for it.
So you could, if you are unlucky or unwise, end up with no home AND a significant mortgage debt. However bad things seem, just moving out and leaving the keys with your financial institution doesn’t look like a smart move.
You may think this is a last resort when you have exhausted all other ideas you had. You may feel you have to give your home to the bank to pay off your debt. You may also be in negative equity, where the loan amount exceeds the present value of your home.
Voluntary repossession is what we have been talking about. You write a letter to your bank to tell them you can’t pay any longer and are giving up the property.
Now it’s important to realise that the bank does not own your property, you do. The bank owns the mortgage loan to you and it can sell the property to pay the debt off if you can’t pay in the normal way.
If your lender sells your house it may be auctioned off quite quickly so that the bank can recoup some of its money. However, this means your home is rarely sold at anything like its true value. The less your home is sold for, the greater your potential remaining debt and the longer it will take you to pay it off. You want your house to sell for as close as possible to market value.
If you allow your lender to repossess your house and sell it off, you might find that the value of the house exceeds your loan and that they owe you money.
However, it is more common for the loan to be greater than the house sale value. If you could have sold it for a reasonable price you would probably have done so already. So it’s more likely you’ll end up still owing a good chunk of debt after the process is over and that will be the penalty you can’t avoid.
By now it may well be clear that giving your house back to the bank could be a bad idea. So what can you do? There are other options, such as selling property for cash with a dedicated house buying service such as Sell Property Fast Cash who guarantee you a good price for your home and a quick completion.
Fill in the form on the website or call 0845 004 1118 to get a decent price for your house.