Can I sell my house if my mortgage is in arrears?

Mortgage arrears do not automatically prevent you from selling your house. You remain able to arrange a voluntary sale while you own the property, but the mortgage lender’s outstanding balance, arrears, interest, legal costs and any other secured charges normally have to be dealt with from the sale proceeds before ownership can be transferred.

The key issue is whether the expected sale price is enough to clear everything secured against the property. Ask your lender for an up-to-date redemption statement and give it to your conveyancer. This should show the amount needed to repay the mortgage on an anticipated completion date, although the figure may change as further interest or costs are added. Your conveyancer can then compare the likely net sale proceeds with the amount required for redemption.

If the sale price covers the mortgage: the arrears can usually be settled as part of completion. The buyer’s funds are sent through the conveyancing process, the mortgage is redeemed, and any remaining balance is paid to you after other agreed deductions. Selling voluntarily may also allow you to retain more control over the timing and marketing of the property than allowing possession proceedings to continue.

If the sale price may not cover the debt: you have negative equity or a potential shortfall. The lender will generally need to agree in writing how the shortfall will be handled before the sale can complete. It may request a contribution from you, evidence of your financial circumstances, or a formal repayment arrangement. Do not assume that the lender will automatically write off the difference. Any unpaid balance can remain your responsibility and may affect your finances and credit record.

Contact the lender’s arrears or collections team as soon as you decide to sell. Explain that you are proposing a voluntary sale and ask:

• for a current redemption statement;
• whether possession proceedings have started and what stage they have reached;
• which charges, solicitor’s costs or interest may be added;
• whether the lender will consider a repayment arrangement while the property is being sold; and
• what information it needs before approving a sale where there may be a shortfall.

Continue making payments if you can, unless the lender or a suitably qualified adviser tells you otherwise. Selling the property does not itself stop arrears from increasing. Missing further payments may lead to additional interest, charges or legal action, which can reduce the amount left after completion.

If the lender has already issued a possession claim, a sale may still be possible, but the position becomes more time-sensitive and procedurally complex. Tell your conveyancer about every letter, notice, hearing date and court order you have received. A conveyancer can communicate with the lender, confirm whether the proposed completion date is acceptable and identify documents that must be provided. You should also obtain independent debt or legal advice if a possession hearing is pending; do not ignore court papers.

When preparing the sale, obtain a realistic valuation rather than relying only on the amount originally paid for the property or the mortgage balance. Your calculations should allow for estate agency or selling costs, conveyancing fees, mortgage redemption charges where applicable, arrears-related costs and any other secured debts. If the property is leasehold, check whether service charge or ground rent arrears also need to be cleared, as these can delay the transaction.

A cash sale can sometimes reduce the number of linked transactions in the chain and may suit an owner who needs a more straightforward disposal. However, it does not remove the requirement to redeem the mortgage or obtain the lender’s agreement to any shortfall. Before accepting an offer, check that the buyer’s proposed price and timescale are consistent with the redemption figure and any deadline set by the lender.

Once a sale is agreed, provide the buyer’s details and the agreed price to your conveyancer promptly. The conveyancer will deal with title documents, enquiries, redemption figures and repayment of the mortgage on completion. Keep copies of the lender’s statements and request confirmation after completion that the mortgage has been redeemed. If a balance remains, ask for the repayment terms in writing and check whether any arrangement affects your credit file.

In summary, arrears do not by themselves remove your ability to sell, but delaying action can increase the debt and reduce your options. The practical steps are to speak to the lender, obtain a current redemption statement, instruct a conveyancer, establish whether the likely sale price covers the secured debt and obtain specialist advice if possession action or negative equity is involved.