Trusted Advice From Experts to help stop house repossession.
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
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.