What is a Voluntary Repossession??
Recently we were asked if we have helped anyone go through “voluntary repossession” to which the reply was no.
This got me thinking and I decided to research into seeing what exactly is a voluntary repossession and what’s involved, so that if we were to come across someone that was considering voluntary repossession, we would be able to give guidance and point them in the right direction.
This is what I found:
Basically, voluntary repossession is when a homeowner chooses to hand back the keys to their property to their lender due to falling behind in their mortgage payments. The homeowner has probably assessed their financial situation and come to the conclusion that where they find themselves has become too hard to live with, causing anxiety and stress.
If voluntary repossession seems the only option, the first step is to communicate your intentions to your lender who will explain the process, which will involve signing legal documents to formalise the handover. The homeowner will still be responsible for the mortgage until the property is sold, including any fees or charges associated with the repossession.
The sale of the property then comes under the control of the lender, who will look to cover the outstanding mortgage balance and any associated costs. If the sale price doesn’t cover the mortgage, the homeowner may still owe the remaining balance, known as a mortgage shortfall. This path will significantly impact the credit rating of the homeowner, making it difficult to obtain future credit or even another mortgage, so requires serious consideration and careful thought about the long term implications.
Before deciding on voluntary repossession, exhaust all other options. Financial advice can provide insights into solutions you may not have considered. Remember that the impact on your credit score and your ability to borrow in the future will be considerable.
Legal Advice: It’s advisable to seek legal advice before proceeding with voluntary repossession. Understanding the full legal implications is crucial.
From what I can see, voluntary repossession doesn’t have to be the last resort to anyone that is in mortgage arrears and facing losing their home. There are (depending on individual situations) other options out there, people just need to know what they are and as the old adage goes “knowledge is power”, you just need to find it.
If you feel you don’t have all the knowledge about what options you may have in regards to avoiding repossession of your home, book a call with us at Repossession Help and we can offer you some guidance.