09. Mortgage and money problems

A mortgage is a loan secured on a property, which means that you cannot sell the property without repaying the loan. If you do not keep up your repayments, the lender ultimately has the right to go to court for an order to repossess and sell your home. But there are certain processes to go through before it gets to that stage. If you are having problems with your mortgage (or rent or other bills), see the Community Legal Service Direct leaflet 'Dealing with Debt'.

Negative equity
If the value of your home has dropped since you bought it, or you haven't made all the mortgage payments you should have, you may find that, if you sell, the amount you get is less than the amount you owe on your mortgage. This is known as negative equity.

If you are in negative equity, your mortgage lender may refuse to allow you to sell your house or flat. It could also go ahead with legal action to repossess your property, unless you can show you can pay off the amount you owe. But you may be able to get the lender to agree to transfer the negative equity to a new home if, for example, you have to move because of your job.

Voluntary repossession
If you feel there is no other way out of your debt, you may feel you have to 'hand over your keys' to your mortgage lender. Only do this as a last resort. If you do it, you will have to pay for alternative accommodation and still pay your mortgage, any arrears and interest until the lender can sell the property. You should get independent advice before deciding to do this.

If voluntary repossession means you become homeless with nowhere else to live, you may find that your local council does not have to offer you accommodation. There is a separate Community Legal Service Direct leaflet, 'Losing your Home', which explains your rights if you face being homeless.