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Selling or Re-mortgaging your Home

By: Louise Smith, barrister - Updated: 6 Oct 2010 | comments*Discuss
 
Selling re-mortgaging lender

Even once a lender has started repossession proceedings it is not too late for a borrower to sell the property themselves. A borrower is entitled to sell, or re-mortgage, at any time - right up until the moment when the court bailiff attends to change the locks.

Selling Before a Case goes to Court

People are sometimes unwilling to consider selling their home. Moving is a huge upheaval and often people simply do not want to leave a house that they may have lived in for years. However, if payments cannot be maintained on the mortgage the ultimate result is that the property will be repossessed and sold by the lender – and probably for less than the borrower might have obtained if they had sold it when they had the chance.

If a borrower concludes that selling is the best, or only, option they should talk to their lender as soon as possible and tell them what they are planning. Provided that there is equity in the property many lenders will hold off taking the case to court so that the borrower has time to sell. Borrowers should keep the lender fully informed of the progress of the sale. The following documents will help convince the lender that a genuine sell is in progress:

  • Copies of correspondence from estate agents;
  • Proof that an offer has been made at a price sufficient to redeem the mortgage;
  • Solicitor’s letters confirming that a sale has been agreed and when it is due to complete.
If a lender knows that they should get their money back without the hassle of going to court and then having to sell the property themselves it is likely that they will be patient.

Selling Once Court Proceedings have Started

Most lenders will continue with court proceedings until they have evidence that a borrower has exchanged contracts. People often say that a property has been “sold” as soon as they receive an offer. However, until contracts have exchanged there is absolutely no guarantee that the sale will complete.

If contracts do exchange before the hearing the possession case will probably be “adjourned generally with liberty to restore”. This means that the case goes dormant but that the lender can revive it if the sale falls through.

Selling After the Possession Hearing

Judges can give borrowers the chance to clear the mortgage debt without the property being repossessed. One of the ways that this might be done is by the borrower selling the property themselves. If a borrower comes to court and says that the property is on the market, many judges will grant a 56-day possession order to give the borrower time to sell, some will even allow three months. Some judges may want to see evidence that the property is on the market for a price that will cover the mortgage. If a sale is imminent, the judge may be prepared to adjourn the case so that that it can go through.

Selling Once an Eviction has been Scheduled

If a borrower applies to stop an eviction on the basis that they are selling the property, the judge will almost certainly want to see some firm evidence that exchange is imminent. The further down the repossession process the case has gone, the more stringent the requirements are likely to be. If the sale price is not enough to cover the mortgage debt a judge is unlikely to stop an eviction on these grounds unless the borrower can also show that they have funds available to cover the shortfall.

Re-mortgaging

Whilst there are many companies willing to provide mortgages to people with financial problems, they are unlikely to be offering the most competitive deals. As soon as a borrower starts missing payments on their mortgage this is likely to show up on credit reports limiting the choice of re-mortgages available to them.

Lenders and the courts view re-mortgages in a similar way to sales. The lender should be kept informed of what is going on and the borrower should provide copies of any correspondence that shows that they are in the process of re-mortgaging. Similarly, judges will often allow a borrower more time if they are satisfied that a re-mortgage is likely to go through.

Conclusion

By addressing the problem as soon as they start struggling with payments, borrowers will improve their chances of either selling their home for a good price or of getting a re-mortgage at a competitive rate.

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