Can you sell your house if you have mortgage arrears?
If you have missed mortgage payments and are wondering whether you can still sell, the answer is yes. This guide explains what happens to the debt, what your lender expects, and what your realistic options are.
Quick answer: Yes — you can sell a UK house with mortgage arrears. The arrears are paid from the sale proceeds at completion. If equity is positive, the lender is repaid in full and the remainder comes to you. If the sale would be in negative equity, you'll need an agreed shortfall arrangement before contracts can exchange. Under the expanded MCOB 13 forbearance rules (PS24/2, in force since 4 November 2024) lenders must also consider alternatives such as payment deferrals before pursuing possession. Selling voluntarily before court action is almost always better for both your credit record and the price achieved — see our deep guide on how to stop house repossession in South Yorkshire.
Yes, you can sell a house in mortgage arrears
You do not need to be up to date on your mortgage payments to sell your property. The outstanding balance, including any arrears, is repaid from the sale proceeds at completion. The lender takes what they are owed before anything else is released to you.
Being in arrears does not prevent a sale. But it does affect your timeline and your options, and understanding that clearly is the first step.
What happens to the arrears when you sell
At completion, your solicitor holds the sale proceeds in client account and uses them to redeem the mortgage in full. That includes the outstanding capital, any accrued arrears, and any early repayment charges that apply. What remains after the mortgage is cleared is yours.
If your property is worth significantly more than the outstanding debt, you will receive equity from the sale even if arrears have built up. If the property has fallen in value and the proceeds will not cover the full mortgage balance, that is a different situation, covered below.
See your real position on the screen — mortgage payment calculator
Before reading further, run your own numbers. Enter your outstanding balance, your current rate and the years left. The figure that appears is the monthly payment driving everything else in this article. The +1% and +2% rate-rise rows show why so many people fell behind through 2023–2024 even though their original mortgage was affordable when they took it out.
Mortgage payment calculator
Enter your loan, rate and term. Numbers update as you type. No data leaves your browser.
If your rate rises at renewal
Honestly — does that monthly figure work for your household?
Good — your buffer is real, but plan for renewal.
If the figure works today, your priority is preparing for the rate at your next renewal. The Mortgage Charter lets you lock in a new rate up to six months before your current deal ends without penalty. If you ever do hit trouble, the forbearance options on this site still apply — they exist for short, unexpected shocks (illness, redundancy, divorce) even when the underlying mortgage is normally affordable.
You're in the zone the Mortgage Charter was built for.
The Charter lets you switch to interest-only for six months or extend your term to reduce monthly payments — both with no affordability check and no credit-file marker. For a loan like the one above, switching to interest-only typically cuts your payment by 30–40%. That alone can absorb a 2% rate shock. If after running those options the maths still doesn't work, selling on your own terms while you still have equity and time almost always beats waiting for a forced sale.
See what we'd offer for the houseYou're not alone, and the order of what to do next matters.
Start with two free calls: StepChange (0800 138 1111) and your lender's hardship team. Both are free, neither will judge you, and asking the lender for help is not a credit-file event under the Mortgage Charter. Lenders have legal duties to try forbearance, term extension and interest-only switches before any repossession step.
If you've had those conversations and the position is genuinely unrecoverable, selling on your own terms — while you still have time, equity and a clean title — is almost always a better outcome than waiting for the court timeline. We don't charge fees, we don't pressure, and we can give you a written offer within 24–48 hours so you know what's on the table.
Get a no-obligation cash offerFor illustration only — not financial advice. Your actual payment depends on your lender's product terms, any product fees, and any arrears already on the account. Get personalised free advice from StepChange or MoneyHelper.
What your lender expects in 2026
You are not legally required to tell your lender before putting your property on the market. But if formal repossession proceedings have started, communication matters. The official process and the protections available to homeowners are set out in the gov.uk repossession guidance.
Since 4 November 2024, the FCA's expanded MCOB 13 rules (Policy Statement PS24/2) require lenders to consider a wider range of forbearance options — payment deferrals, term extensions, interest-only switches — before pursuing possession. Over 311,000 mortgages have also been enrolled under the Mortgage Charter, which gives borrowers further breathing room. UK Finance Q1 2026 figures show arrears remain elevated against pre-2023 norms but are easing from the 2024 peak, so lenders are well-practised in handling these conversations.
Most lenders will pause or delay repossession action if they have confirmation that a credible sale is under way. This is because a voluntary sale on the open market almost always returns more money to the lender than a forced repossession auction. Lenders cooperate because it is in their interest to do so. The court-mandated Pre-Action Protocol for Mortgage Possession Claims also requires them to treat possession as a last resort and to consider any reasonable proposal you make. Free, impartial advice on dealing with mortgage arrears is available from MoneyHelper.
Keep communication short and factual: you are selling, you have instructed a solicitor (or you are in the process of doing so), and you will keep them updated. Do not go silent.
If you have received a formal possession claim from the court, tell your solicitor immediately. Section 36 of the Administration of Justice Act 1970 (as interpreted in Cheltenham & Gloucester v Norgan) gives the court discretion to suspend possession if you can repay arrears within a reasonable period — and a genuine sale in progress is one of the strongest reasons to ask for that suspension. There are strict deadlines once court proceedings begin, and missing them can affect your options significantly. Read our full step-by-step playbook in how to stop house repossession in South Yorkshire.
What if the sale proceeds will not cover the mortgage?
If your property is worth less than the outstanding mortgage balance, you are in negative equity. Selling becomes more complicated in this situation, but it is still possible.
Your lender needs to agree to release their charge on the property for less than the full balance owed. This is sometimes called a shortfall sale. Most lenders will consider it, because repossession followed by an auction typically returns even less than an agreed shortfall sale.
If there is a shortfall, you may remain liable for the remaining debt after the sale. Lenders can pursue a county court judgment for the shortfall, though many negotiate or write off small amounts rather than pursue legal action against someone who has already lost their home.
If you think you are in negative equity, speak to a debt adviser or solicitor before committing to a sale route. Understanding the full picture early avoids surprises at completion. You can read more in our guide to negative equity.
How the urgency level changes your options
The more serious the repossession situation, the more important speed becomes.
If you have missed a few payments but no formal action has begun, you have time. You can go to market with an estate agent, price properly, and achieve close to full market value. This is often the right approach when time allows.
If a possession order has been granted and a repossession date has been set, you need a sale that completes before that date. An estate agent process typically runs three to six months from instruction to completion, and will not meet that deadline. You need a method with a fixed, guaranteed completion date.
Your options for selling with arrears
Estate agent on the open market
Best if you have time. Achieves the highest price. Falls short when the timeline is critical or when the property needs significant work. There is also fall-through risk. A buyer pulling out weeks before completion would leave you back at the start.
Property auction
Auction exchange happens on the day, removing pre-exchange fall-through risk. Completion typically follows 28 days later. The guide price is set at a discount to attract bidders, and auction fees reduce net proceeds. But for sellers who need a fixed completion date and cannot risk another collapse, auction is a reliable route.
Cash buyer
A cash buyer does not need a mortgage, does not have a chain, and can fix a completion date in advance. Sales with South Yorkshire Property Buyers typically complete within 7 to 28 days, depending on how quickly the legal work can be done. There are no estate agent fees and no solicitor costs to you.
If your arrears are serious and the clock is moving, a cash sale removes the uncertainty and gives you a firm date to work to. We can also work directly with your solicitor and lender to manage the payoff of the mortgage at completion.
Please note: taxes including Capital Gains Tax remain the seller's responsibility. We recommend seeking independent tax advice if applicable.
Common questions
Can I sell my house if I have been given a repossession date?
Yes, in most cases, but the timeline is critical. A voluntary sale before repossession usually produces more money for you and the lender than a forced sale. A cash buyer can sometimes complete within days. If a court date has been set, speak to a solicitor immediately.
Will my lender let me sell if I am in arrears?
Yes. You do not need your lender's permission to sell. Their interest is in recovering the outstanding balance, and a voluntary sale on the market returns more than repossession. Communicate with them early and keep them updated.
What happens to the arrears at completion?
Your solicitor redeems the mortgage in full from the sale proceeds at completion. This includes the outstanding capital, arrears, and any applicable charges. The lender receives their amount first; remaining proceeds are released to you.
Do I need my lender's permission to sell?
No. You can list and market your property without lender permission. However, if formal repossession proceedings are under way, telling the lender a sale is in progress may persuade them to delay action.
What if my arrears are large? Will the sale still cover them?
It depends on your equity position. If your property is worth considerably more than the outstanding mortgage, arrears will be cleared at completion with money to spare. If the property is worth less than the mortgage balance (negative equity), you will need to negotiate a shortfall arrangement with your lender.
Does selling voluntarily affect my credit file differently to repossession?
Yes. A voluntary sale that clears the mortgage in full leaves arrears markers on your credit file but no repossession entry. A court-ordered repossession is recorded separately and is significantly more damaging — it can affect mortgage applications for six years or more. Selling before court action almost always protects your credit position.
What is MCOB 13 and how does it protect me in 2026?
MCOB 13 is the FCA's Mortgages and Home Finance Conduct of Business rulebook chapter covering arrears and repossession. The PS24/2 expansion of forbearance rules came into force on 4 November 2024, requiring lenders to consider a wider range of forbearance options before pursuing possession. Lenders must treat customers in arrears fairly and explore alternatives such as payment deferrals, term extensions, and interest-only switches.
What is the Pre-Action Protocol for Mortgage Possession Claims?
It is the court protocol lenders must follow before issuing possession proceedings. They must contact you about the arrears, consider any reasonable repayment proposal, and treat possession as a last resort. Section 36 of the Administration of Justice Act 1970 (read with Norgan) also gives courts discretion to suspend possession if you can repay arrears within the remaining mortgage term. A genuine sale in progress is a strong reason to delay.
How many UK homeowners are in mortgage arrears in 2026?
UK Finance Q1 2026 data shows homeowner mortgage arrears remain elevated against pre-2023 norms, though they have eased slightly from the 2024 peak. The Mortgage Charter, which supports borrowers facing payment shock, has now seen more than 311,000 mortgages enrolled. If you are struggling, you are not alone — and you have more options than the standard advice suggests.
Selling a house with mortgage arrears in South Yorkshire?
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