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Yes, you can usually sell your home while you have mortgage arrears. Your lender is repaid from the sale proceeds, including the arrears you owe, before anything is released to you. Provided the sale price covers your mortgage balance and the arrears, selling can be a workable way to deal with debt you cannot otherwise clear, and it is often a better outcome than waiting for a lender to start repossession proceedings.
Whether selling makes sense for you depends mainly on how much equity is in your home and how quickly you need to move. Speaking to your lender and to a free debt adviser before you put the property on the market means you go in with a clear picture of what you owe and what, if anything, you are likely to have left afterwards.
How a sale clears your arrears
When you sell, your solicitor uses the sale proceeds to repay your mortgage in full, including any arrears, before the balance is paid to you. This happens automatically as part of completion, so you do not need to clear the arrears separately beforehand. Your lender will confirm the exact figure you owe in a redemption statement, covering both the remaining mortgage balance and the arrears.
Because the arrears are repaid at completion, the missed payments will still show on your credit file for 6 years from when each one was recorded, even though the debt itself is cleared. Selling settles the money owed; it does not remove the history.
Getting a redemption statement
A redemption statement sets out exactly what you need to pay to clear your mortgage on a given date, including the outstanding balance, arrears, interest and any early repayment charge. Ask your lender for one as soon as you are seriously considering selling, and again closer to your expected completion date, since interest continues to accrue.
If arrears have led to any additional fees or charges, these should also be listed. Query anything you do not understand before you agree a sale price with a buyer, so you know your likely proceeds.
Check whether an early repayment charge applies too, particularly if you are still within a fixed deal. This is separate from the arrears and adds to what you need to repay at completion, so it should be included in the figure your lender confirms.
What if the sale price will not cover what you owe
If your outstanding mortgage and arrears are more than your home is worth, this is negative equity, and a normal sale will not clear the debt in full. In that situation:
- talk to your lender before marketing the property. Some lenders will consider a shortfall sale, where they agree to release the property even though the sale will not cover the full balance, but they are not required to agree
- ask what happens to the remaining balance after the sale. A shortfall debt can still be pursued, sometimes for several years, so get this in writing
- get free debt advice before agreeing to anything, so you understand what a shortfall means for your other finances
Our guide on what equity in a house means explains how equity is worked out and what negative equity involves.
Selling voluntarily compared with waiting
Lenders generally prefer to agree a voluntary sale over pursuing repossession, since it usually costs less and resolves the arrears without a court order. Selling voluntarily also tends to give you more control: you can choose your estate agent, agree your own timeline within reason, and avoid a repossession being recorded against you.
Our guide on how many months of arrears before repossession explains that lenders must follow a pre-action protocol and treat repossession as a last resort, but they are not required to wait indefinitely, so if you are considering selling, telling your lender your plan and timescale early can help.
| Selling voluntarily | Waiting for repossession | |
|---|---|---|
| Who controls the sale | You do, with your estate agent | The court and, ultimately, the lender |
| Effect on arrears | Cleared from sale proceeds at completion | Arrears and costs are added to what you owe |
| Effect on credit file | Missed payments still show for 6 years | Missed payments and any shortfall may show for 6 years |
| Timing | Can often move at your own pace, within reason | Set by court timetables once proceedings start |
This table sets out general differences; each lender’s approach and each court’s process vary.
What this means if you would rather remortgage than sell
Selling is not the only option. If you have enough equity and your arrears are historic rather than current, it may be possible to remortgage instead, particularly with a lender who takes a broader view of adverse credit. Our hub page on remortgaging with mortgage arrears explains how lenders generally treat current arrears compared with arrears that have since been cleared.
If you are still behind now, read how to clear mortgage arrears for the options many lenders will want to see in place before considering a new mortgage.
Getting help before you decide
Selling your home is a big decision, and it is worth getting advice before you commit either way. MoneyHelper, StepChange and National Debtline offer free, independent advice and can help you weigh selling against staying and agreeing a payment plan. Shelter can also give free housing advice if you are worried about losing your home.
If you decide to sell, tell your lender your plan as early as possible. Most lenders will work with you on timing if they can see a sale is genuinely progressing, and a clear plan is one of the strongest ways to avoid the case moving towards court.
Frequently asked questions
Do I have to pay off my arrears before I can sell my house?
No. Your solicitor uses the sale proceeds to repay your mortgage in full, including the arrears, at completion. You do not need to clear the arrears separately beforehand, though your lender will confirm the exact figure owed in a redemption statement.
What happens if my house sells for less than I owe?
This is negative equity. Some lenders will consider a shortfall sale, releasing the property even though the price will not clear the full balance, but they don't have to agree, and the remaining debt can sometimes still be pursued afterwards. Talk to your lender and get free debt advice before agreeing to anything.
Will selling with arrears affect my credit file?
The missed payments that caused the arrears will still show on your credit file for 6 years from when each one was recorded, even though selling clears the debt itself. Selling settles what you owe; it does not remove the history.
Is selling better than waiting for repossession?
Often, yes. A voluntary sale usually gives you more control over the timing, the price you accept and how the process unfolds, whereas repossession is decided largely by the court and your lender. Selling voluntarily can also avoid a repossession being recorded against you. See how many months of arrears before repossession for the steps a lender must follow first.
Could I remortgage instead of selling?
Possibly, if you have enough equity and your arrears are historic rather than current, since many lenders will not consider an application while arrears are still owed. Some lenders take a broader view once your payment record since has been clean. See remortgaging with mortgage arrears for how lenders generally view this.