Following this dubious honour, residents of the Northamptonshire town are being urged to seek help before letting lenders repossess their homes.  Things ia are not as clear cut as they seem, however.  Recent figures from Britain’s Council of Mortgage Lenders show 11,400 repossessions in the second quarter of this year, 25% of which were voluntary.  That is, the houseowners concerned simply handed in their keys without seeking help or assistance.

At the beginning of September the government launched a national campaign that will see £130 million invested in the provision of free face-to-face debt advice via Citizens Advice Bureaus.  An article that appeared in a recent edition of the Corby Evening Telegraph quotes MP Phil Hope, who represents the area at Westminster, as saying that there is hope out there if people know where to look and, as part of this campaign, advertisements are to appear in Corby telling people where and how they can find that help.

voluntary repossession: The Facts

Don't Let Them Take Your Home

When faced with redundancy, reduced hours, sickness, or any of the other afflictions that affect the ability to pay your mortgage, voluntary repossession can seem like the best option.  It can be so tempting just to hand over the keys and walk away.  Like most things in life, however, it is not quite as easy as that.  For the full story, read our article Voluntary Repossession Facts.   The simple fact is that, even if your mortgage lender suggests this course of action – think twice.

Back in April of this year, one correspondent wrote: “i have just handed my keys back to the mortgage company and we had our house valued in october 2008 it was valued at 222,000 The building society have just put our house up for sale ai 135,000 surely this cant b right” Sadly, this experience is not uncommon.

Remember, if you choose to hand in your keys:

• You will have to pay the mortgage until the property is sold
• You will have to pay rent on an alternative home
• The proceeds of the sale will be used to pay mortgage and insurance debts
• You will doubtless pay a penalty charge for missed mortgage payments

This is why it is vital that you explore every avenue.  Even if you don’t live in Corby, it’s well worth contacting your local Citzens Advice Bureau. You could also take a look at the Government Mortgage Scheme , which was set up to provide help for those with financial troubles.

With many financial authorities predicting further falls in property prices and more job losses, it could pay you to find about the various options sooner rather than later.

What happens with voluntary repossession?

This is when, as a last resort, you simply hand over your keys without going to court. Your lender might even suggest this to you if they think it is unlikely you’ll be able to repay your arrears.

Voluntary repossession can seem like an easy, stress free solution at a glance. But your debt will probably grow as a result. And lenders will be very reluctant to lend to you in the future. Think twice… if you’ve already decided to hand your keys in, you might still have time to find a better option.

You still pay your mortgage after voluntary repossession

Voluntary repossession doesn’t solve everything. Even though you hand in your keys, you still have to pay the mortgage until your home is sold. You also have to pay for somewhere else to live while things are being sorted out. Because it might take some time for your home to sell, the amount you owe can go up dramatically while you wait. Your lender will use the money from the voluntary repossession sale to pay all sorts of things:

* If you have an interest only mortgage, there’s your endowment policy or ISA payments
* At least six weeks’ worth of Council Tax
* The capital that you borrowed in the first place, plus the interest you owe
* Buildings insurance
* Your arrears
* Penalty charges for missed mortgage repayments

For more voluntary house repossession facts:

DCMoney.co.uk and MoneySavingExpert.com

Low sale price

Remember if you go for voluntary property repossession your lender probably won’t get as much money for your home as you would if you sold it privately. Lenders often accept quick-sale offers considerably lower than the market value. And properties sold at auction often sell for much less than they’re worth.

Beware of Mortgage Indemnity Guarantees

Not many people are aware that while a Mortgage Indemnity Guarantee pays off the difference between the property’s value and your mortgage, the insurance company will probably take legal action to get the money back from you. Even after the property is sold!

Don’t forget to factor in extra costs and fees

Usually you’d have to repay any ‘reasonable’ costs that your lender has paid on your behalf. This includes estate agency and auctioneer’s fees as well as bills for essential repairs.

Capital Gains Tax

The final insult? If the property’s value has gone up since you bought it and it isn’t your main home because you’ve rented it out, you’ll probably have to fork out Capital Gains Tax for voluntary house repossession.

We would like to hear from anyone who has any experience with voluntary house repossession.