Voluntary Repossession – The Process
Posted on August 30, 2010
Filed Under Bankruptcy, Credit, Debt Relief, Loans, Personal Finance | Leave a Comment
The Pro’s And Con’s of A Voluntary House Repossession
If you unable to pay your mortgage, one possible option is to leave and give your keys back to your lender. This is called voluntary house repossession. Your lender may suggest this if you are unlikely to be able to pay off what you owe on the mortgage and arrears.
This really is a very last resort. If you hand over the keys, your debt will most likely increase and it will become much more harder to get a mortgage again. If you have already agreed to give your keys to your lender, until the house is sold, it may not be too late to find another choice other than voluntary repossession.
Paying The Mortgage After A Voluntary Repossession
If you hand back your keys, you will still have to pay your mortgage debt until your mortgage lender sells your property and you may also have to pay for somewhere else to live. The money your lender gets from selling your house will have to cover:
- the mortgage amount you originally borrowed, plus interest to be paid back
- buildings policy insurance (remember, your policy may be invalid if the property is empty, in which case you’ll need to take out a new policy)
- any loan arrears that you may have
- fines and interest charges for any missed payments
It may take a while for your mortgage provider to sell your property, so the amount you owe is likely to increase a lot more. A poie calculator may be useful in working out your mortgage re-payments payments and any outstanding balance.
It is unlikely the mortgage provider will get as high a price for your home as you would if you sold it on privately. Lenders will try and sell on repossessed properties as quickly as possible, so they may agree a lower than market value offer or sell the house at auction.
If your house is sold on for less than the amount you owe your mortgage provider, you will have to pay off any remaining loan debts. If you took out a mortgage indemnity guarantee, this could pay off any difference, but the insurer may take legal action to force you to pay it all back, even after the house is sold on afterwards.
You normally have to repay any reasonable costs incurred by your lender when selling your property. This may be a lot of money and usually includes auctioneers’ or solicitors fees and bills for any essential repairs that are required.
Additionally, you may have to pay some capital gains tax when the sale is finished if, the value of the home has increased since you bought it and if it is not your main home (for example if it has been rented out to others). If you would like to receive more information on voluntary repossession and what it can mean to you and your family please speak to one of our expert voluntary repossession advisors.
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Related posts:
- How To Avoid Repossession In The UK
- IVAs (Individual Voluntary Arrangements) : The Basics Explained
- Individual Voluntary Arrangements – Advice From An Expert
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