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Is Voluntary Repossession A Good Option When Facing Mortgage Arrears?

Housing-Market / Mortgages Jul 15, 2015 - 04:55 PM GMT

By: Submissions


Victoria Adams writes: What Is Voluntary Repossession?

If you are unable to pay your monthly instalments on a secured home loan/mortgage, there are chances that your lender might want to evict you and repossess your home. In such conditions, the first thought that would strike you would be to hand over your house keys to the lender voluntarily without facing the embarrassment of someone throwing you out of your house. This is known as voluntary repossession.

So when you are thinking of giving your keys back to your lender, here are a few things that you must know:

  1. A voluntary home repossession is not really different from a normal house repossession. The only difference is that you do not have to go through the process of court hearings. 
  2. Unfortunately the bailiffs will still come to your house to ensure that the gas, water and electricity are all working fine and that you haven't destroyed the property. They will also change the locks of your home. 
  3. Whether a house repossession is voluntary or involuntary, you are still liable to pay the remaining amount after your lender sells off the house. This is known as the deficiency balance. 
  4. Voluntarily surrendering your home will not necessarily prevent the creditor from noting: late payment/repossession on your credit report.

Now this bring up a very important and critical question!

Will voluntary repossession affect your credit score?

Yes, you surrendered your home willingly and it saved you from the embarrassment you would face in front of your family and friends. Unfortunately, from a lender’s perspective, the bottom line is that he will still consider that you had faced home repossession. It ultimately indicates that the borrower failed to keep up with his/her payments on the loan. This is considered extremely negative and would definitely have a substantial impact on the borrower's credit scoring and ratings.

Hence, a voluntary house repossession should not even be the last resort your are thinking of. If you hand over the keys of your home, your debt will probably increase and then it might become more and more difficult for you to obtain any kind of a loan or a mortgage in the future. Even if you have already agreed to surrender your home to your lender, it may not be too late to speak to professionals who can help you find another alternative other than voluntary house repossession.

What should you do when you are facing mortgage arrears?

Although there is no way you can hide your inability to pay off your mortgage, avoiding your lender's phone calls and letter might worsen the situation. You should immediately inform your lender if you think you are going to face the risk of home repossession in the near future. Try to explain your financial situation to the lender. Some institutions and lenders will understand and will try to work out a solution or negotiate a late payment. 

Before you consider a voluntary repossession, please contact us experts like Stopping Repossession UK since they have various solutions, options and alternatives apart from handing over the keys. You can benefit by talking to them. Do not delay speaking to them! 

The expert advisers at Stopping Repossession UK will be able to give you a friendly advice. Their years of experience in this field makes them extremely knowledgeable in all areas governing the home repossession. 

Copyright © 2015 Victoria Adams - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

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