Behind on Your Mortgage? Options to Sell and Clear the Arrears

If you are behind on your mortgage, the most important thing to know first: yes, you can sell your house to clear the arrears, and doing so is often a better outcome than waiting for repossession. As long as the sale clears what you owe, you stay in control of the price and the timing instead of handing that control to the lender and the court. But selling is not the only option, and it is not always the right first move — this guide walks through what to do, in what order, calmly and in plain English.

Falling behind happens to people for ordinary reasons: a job loss, a relationship breakdown, illness, rising rates, or a buy-to-let that no longer covers itself. Lenders deal with this every day, and there is a well-defined framework that exists to give you options. The worst thing you can do is nothing.

Step one: speak to your lender before anything else

Before you list the property, before you talk to a fast-sale company, before you panic — contact your lender. Under the rules set by the Financial Conduct Authority (the MCOB conduct rules) and the court Pre-Action Protocol for mortgage arrears, your lender is required to treat you fairly, deal with you sympathetically, and explore alternatives to repossession before going to court. Repossession must be a genuine last resort.

Lenders would generally rather keep a paying customer than repossess — repossession is expensive and slow for them too. Tell them honestly what has changed and what you can realistically afford. The conversation alone often unlocks options you did not know existed, and it puts a clear record on file that you are engaging, which matters if the case ever reaches a judge.

Forbearance: the options your lender can offer

If your difficulty is short-term — a few months of disruption rather than a permanent change in affordability — forbearance may be all you need. Common measures include:

• A payment holiday or payment deferral — pausing or reducing payments for a set period. Interest usually still accrues, so the balance grows slightly.
• A temporary switch to interest-only — you pay only the interest for a while, lowering the monthly cost until you are back on your feet.
• Extending the mortgage term — spreading the remaining balance over more years to reduce monthly payments (you pay more interest overall).
• Capitalising the arrears — adding the missed payments to the outstanding balance and re-spreading them, so you are no longer formally "in arrears".
• A temporary arrangement to pay — agreeing to pay the normal monthly amount plus a small extra sum to clear the arrears gradually.

Forbearance is the right route when the income shock is temporary and the home is still affordable in the long run. It is not the right route if the property has simply become unaffordable — in that case, kicking the can down the road just adds interest and stress. That is where selling comes in.

The arrears-to-repossession path — and why time matters

Understanding the timeline removes a lot of the fear. Repossession is not a switch the lender flips the day you miss a payment; it is a staged legal process, and at almost every stage you have the chance to change the outcome.

1. Missed payments and arrears notices. The lender contacts you and is required to set out the position and discuss options. This is the moment to engage.
2. Pre-Action Protocol. Before applying to court the lender must follow the protocol — providing information, considering your proposals, and only treating court action as a last resort. They typically will not start court action until arrears reach around three months.
3. Court application and possession hearing. If matters are unresolved, the lender applies for a possession order and a hearing is listed. You can attend, explain your situation, and propose a plan — including showing that the house is on the market and a genuine sale is progressing.
4. The court's decision. A judge can adjourn the case, grant a suspended possession order (you keep the home as long as you stick to an agreed payment plan), or grant an outright order.
5. Eviction stage. Even an outright order does not mean immediate eviction — the lender must apply separately for a warrant and bailiffs, which adds further weeks.

The whole process commonly runs from several months to well over a year. That window is exactly why a controlled sale beats a forced one: if you sell in good time you set the price and pocket any equity, whereas a repossessed property is usually sold quickly by the lender for whatever it fetches, with the costs added to your debt.

Selling to clear the arrears: open market vs fast sale

If the home is no longer affordable, selling to clear the mortgage and arrears is a legitimate, often sensible decision. The key question is how fast you need to complete, because that determines which route fits — and there is a genuine trade-off between price and speed.

A practical tip: tell your lender you are actively marketing the property and share evidence (the agent's listing, or a memorandum of sale). Most lenders will pause or slow possession action while a genuine, progressing sale is on the table, because a borrower-led sale is a better result for everyone than a repossession.

What if I'm in negative equity?

Negative equity changes the picture. You usually cannot sell without the lender's consent if the price will not redeem the mortgage, and a sale at a loss may leave you owing the shortfall. If you are in or near negative equity, do not rush into a sale. Speak to your lender and get free, independent debt advice first — there may be better options, such as a formal arrangement on the shortfall, that you would lose by selling hastily. Ask your lender for a redemption statement so you know the exact figure a sale would need to clear.

Free, independent debt help — use it early

Before any major decision, get free advice from an organisation that has no financial interest in what you choose. These services are confidential, will look at your whole situation (not just the mortgage), and can even speak to your lender on your behalf:

• StepChange Debt Charity — free, comprehensive debt advice and managed plans.
• National Debtline — free advice line and self-help resources, run by the Money Advice Trust.
• Citizens Advice — free local and online help on debt, housing and benefits.
• MoneyHelper — the government-backed service with guides on mortgage arrears and a free debt-advice locator.

None of these charge a fee. Be wary of any company that wants payment to "stop repossession" or to give debt advice — the help above is free and impartial.

Where L&M fits in

L&M Property Sourcing is a London-focused property sourcing business. We are building a network for sellers who need a fast, controlled exit — including landlords and homeowners facing arrears — and a register of investors interested in those properties. We do not give debt advice, and the free services above should always be your first call. Our role is to give you a clear, honest picture of the sale options when you have decided selling is the right path, with a price methodology grounded in a discount to a RICS Red Book valuation rather than vague "below market value" promises.

To be straight with you: our seller service is not live yet. Our anti-money-laundering (AML) supervision is pending, so we are currently waitlist only — we cannot buy your property, make you a cash offer, or promise a completion date today. If you would like us to get in touch when the service opens, you can join the seller waitlist below. In the meantime, speak to your lender and get free debt advice — that is the most useful thing you can do this week.

This is general information, not financial, legal or tax advice — seek independent professional advice.

Frequently asked questions about selling when you're behind on the mortgage