Handing over the keys of your house should be the last resort if you have been threatened with repossession. Unfortunately, sometimes voluntary house repossession is the only option to get a grip on mortgage problems but before deciding on this step, it is of utmost importance to understand what the voluntary repossession of your house means and more importantly, to make sure that you have really exhausted all other options to stop repossession.
Voluntary Repossession Doesn’t Necessarily Mean the End of Your Mortgage Problems
If you want your house to be repossessed and are considering voluntary house repossession, you are obviously having problems with your monthly mortgage repayments and are probably several months in arrears. Unless you do something about it, your lender will trigger a repossession process which can lead to you losing your home.
In order to get their money back, the lenders normally try to sell repossessed homes as quickly as possible. But until they do – and sometimes it can take quite some time – you are still legally obliged to continue paying your mortgage even if you have returned the keys. This means that your mortgage problems don’t end once your house has been repossessed. Furthermore, until your home is sold, you are also obliged to repay the interest on: your mortgage, arrears if you have any, penalties for missed payments and buildings insurance. And if you are unable to keep up with your repayments, your debt can increase dramatically in the meanwhile. As a result, voluntary house repossession can make your mortgage problems even worse.
Voluntary House Repossession Can Negatively Affect Your Tax and Benefits
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Even if you are entitled to universal credit, jobseeker’s allowance or any other benefits, these may be withdrawn or reduced in case you get any money after your home has been sold and mortgage repaid. If the repossessed house is not your only property or main home, you may also be charged capital gains tax after its sale. More importantly, voluntary house repossession can make it difficult to rent somewhere, or get a new mortgage in the future as well as get help from your local council if you have no place to go.
If you have returned the keys of your home without first trying to find an alternative solution for your mortgage problems, you may be regarded as intentionally homeless. As a result, your homeless application may be rejected. However, voluntary repossession doesn’t automatically mean you will be considered intentionally homeless. Before approving or rejecting your application for help with homelessness, the council will also consider factors that led to you losing your home, e.g. illness, losing job or divorce, which has made it difficult to deal with the selling process.
Don’t Forget About the Hidden Costs of Voluntary House Repossession
In addition to the interest, insurance, penalty charges, etc. which you are still obliged to continue paying after you hand over the keys, the lender will also charge you the costs of selling your house including the costs for repairs to your home if necessary, estate agent fees, energy certificates, and so on. Also important to bear in mind is that by handing over the keys and letting the lender sell your house, you will probably lose quite a lot of money.
This is because the lenders typically sell repossessed houses at much lower prices than the owners themselves. What’s more, it’s possible for them to sell your house for less than you owe and as a result, your financial difficulties may be far from over. If your home was sold well below its value, however, you can challenge your lender at court, but this can be a long and costly process with a very uncertain outcome.
Alternatives to Voluntary House Repossession
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If you are still wondering whether you should volunteer your house for repossession, bear in mind that there are other options (even if you live in a repossession hotspot!) and that even if you have already accepted to hand over your keys, you may still be able to work something out. Talk to your lender about alternative options to voluntary house repossession, get an expert’s advice (don’t worry about the money, you can get free help from your local council and organisations such as Shelter England) and don’t give up even if your case has gone to court. It may not be too late to, not only find a better solution, but avoid losing your house. If you have exhausted all the options and cannot find a way to keep your home, you should perhaps also consider selling your house quickly. We offer fast property valuation and a guaranteed cash offer within days! Contact us today and to discuss other options that voluntarily allowing your home to be repossessed.
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