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During the recession many homeowners within the UK were at risk of repossession as they couldn’t afford repayments on their home. As well as this due to the sudden fall in house prices, many people found themselves in negative equity, as they owed more to their mortgage lender than the value of their home. Towards the end of 2001, there was a huge 1 in 20 homeowners in this position, with another 16% at risk. Having negative equity can be frustrating and upsetting especially when you have put so much work into your home so far, but generally it isn’t a problem until you come to put your home up for sale.
In most cases the best option is always to stay where you are and aim to pay off your mortgage. Within time, house prices may rise potentially reversing the process, and you will have also paid more towards your mortgage, putting you in positive equity, so don’t be hasty in selling your home unless you have to, and then you could opt to sell your house quick. If you have any debt, you may also be trying to juggle keeping up the repayments on your home as well as paying off your debt. In this instance it is always a good idea to use any savings you have to pay off your debt, particularly as mortgage rates always tend to be better than savings rates. Your money is therefore better off being used to pay off your mortgage or any arrears as opposed to leaving it in a savings account. Check with your mortgage lender about any penalties you may incur through paying off your mortgage early. Most lenders will allow a certain amount before any charges apply, so be sure to check first.
If you find yourself having difficulty keeping up your mortgage payments you may feel forced to sell your home. In this situation you may wish to sell house quickly in order to avoid the consequences of repossession but it can also prove to be a problem if you have negative equity. Whatever happens it is important that you get professional advice from someone who can help you in this situation. If you choose to have a quick home sale, you may be able to pay off any shortfall to your mortgage lender over time, but you will need permission to sell your home at a rate lower than what your outstanding mortgage amounts to. Bear in mind that you will have the expense of moving to deal with which could prove costly, so it’s a good idea to weigh up which is better for you. Certainly don’t be hasty in your decision.
You do have the option to allow your mortgage lender to repossess your home but this is highly advised against due to the negative repercussions. Many lenders will sell your home at auction which also attracts lower bids, therefore in most cases you will end up owing your mortgage company a lot more, and don’t forget your credit rating will be seriously affected making it difficult to get another mortgage or any kind of credit in the future.
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