Voluntary repossession is when you voluntarily hand the keys to your home back to your mortgage company. This means you stop paying your mortgage payments and will have to move out of your house. People normally go through voluntary repossession when they have no way of paying their mortgage and can not sell their property, as it is in negative equity.
Is voluntary repossession suitable for me?
If you can not make your mortgage payments, your mortgage lender should give you a suitable time to sell your property. If your property is negative equity then you will find it impossible to sell. Therefore this is the perfect situation for a voluntary repossession.
If you were to allow your property to be repossessed you would remain liable for any outstanding balance on the mortgage and secured loan once the property had been sold by your lender. Unless you have declared bankrupt, where this debt will be included in your bankruptcy. However, if the property was jointly owned, then the other parties named will become liable for it.
Please also bear in mind that should you allow the property to be repossessed you would also be liable for the building and its contents, again until the property has been sold. Please seek further free money advice to discuss all the potential options available to you given your specific set of circumstances.
What is the process for voluntary repossession?
The good think about voluntary repossession is that you can manage the process on your own terms. All you need to do is find alternative accommodation to stay at and then you’ll be ready to move out. The next step is to contact your mortgage lender and explain your situation. Let them know you can no longer pay your mortgage and need to hand back in your keys. You can then cancel your mortgage payments and again let your mortgage lender know.
At this point, you could be asked to sign a voluntary surrender form by your mortgage lender. This form is to confirm that you will remain liable for any mortgage shortfall after the mortgage lender sells your house. Please note, if you voluntarily hand back your property to the mortgage lender, there will be no court enforcement from your secured lender.
Do I have any debt after voluntary repossession?
Once the property is sold, any outstanding debt that was not repaid from the sale becomes an unsecured debt and you are still liable to repay it. You should contact your old mortgage lender. Then ask what the current position is i.e. did the sale clear the mortgage and secured loan? Only then will you know what debts you have currently. You can then approach the lender to start to make repayment.