What you need to avoid
Taking out another, fresh loan to repay your debts
Such loans can prove to be exorbitant expensive and are usually secured on your home, hence, placing your home at greater risk. Mortgage offers which guarantee to assist you in avoiding repossession can also place you at increased risk.
Returning the keys
You are going to be liable for mortgage repayments on your home prior to it being sold, and potentially the outstanding balance should the money raised from selling your home not be adequate to pay off your debt.
It is not advisable to do so without discussing your situation with your lender first and gaining an understanding of the consequences. You ought to be aware that:
- You will remain in debt, owing the lender any outstanding debt/mortgage, including the interest built up on the loan, until the property has been sold.
- You are going to have to pay the costs involved in selling the property; you will still owe for any shortfall between the sale price of the property and your outstanding debt.
- Your lender could chase you for payment of the total amount you owe, through the courts.
- Your name could be added to a register of those who have had their properties repossessed and you could find it more difficult to get a loan in the future.
Selling your home should you not have anywhere else to live
You local authority may refuse to assist you in finding you somewhere to live should they consider that you have made yourself homeless intentionally.
Don't just ignore your lender's letters or phone calls. Should you not understand the communication, ask your mortgage lender or a debt adviser to clarify the situation.
Ceasing mortgage repayments
Never just cease your mortgage payments altogether. Should you not be able to meet the full repayment: discuss the matter with your lender and pay what you can afford every month.
Be Careful with Sale and Rent-Back Schemes
Some companies can offer to assist you should you get into problems meeting your mortgage payments by purchasing your home and then renting it back to you for a set period of time, i.e., six months or more. Such schemes are known as 'rent back', 'mortgage rescue' or 'sell-to-let' schemes.
Sale of such schemes is regulated by the Financial Services Authority (FSA). Prior to commencing with a scheme you ought to contact the FSA to check whether or not a company is registered to ensure that their complaints procedures are accessible should things not work out.
Selling your home hereby can enable you to clear your mortgage debts and remain in your property. However, should you choose such a scheme you are no longer the owner of your property and could face eviction should you lag fall behind with paying rent. Such a scheme needs careful consideration and you need to be fully aware of the potential consequences. You really ought to consider obtaining independent valuation and advice prior to deciding.