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A mortgage shortfall can occur when your home is repossessed and sold by your lender but the amount they receive for the sale is less than the amount you owe. Once the property has been sold, the lender is entitled to take whatever is owed to them plus any legal fees; they will then pay any other outstanding debts secured on the property. Although the lender is obliged to seek the highest possible sale price for your property, it is not always enough and you will usually be liable to cover any resulting 'shortfall', although it is not considered a priority debt. In other words, your lender will not be able to take any more of your possessions to cover it but they are allowed to try and recuperate the debt from you for up to twelve years thereafter.
Obviously it is preferable to avoid the situation of repossession altogether and anyone having difficulties meeting their mortgage payments should, in the first instance, contact their lender. Despite what you might think, most lenders do not want to see you struggling with your payments and would much rather all their borrowers were able to keep up with their mortgage payments.
If you are already in arrears with your mortgage repayments, your lender will be able to suggest ways you can try to pay off the arrears while still maintaining your regular payments. If you are really unable to make these extra payments, there might be the possibility of delaying them for a while until your financial situation improves, or adding them to the total value of your loan. As with all repayment amendments, the options available in your own individual case will depend on a number of factors, including your repayment history to date and whether your financial problems are expected to be long or short term. Whatever situation you find yourself in, it is always worth making that extra effort to pay as much as you can manage each month as making regular payments, even if the amounts are not always the same, will demonstrate to your lender that you are committed and are making an effort. This is likely to lead to more compassionate treatment when discussing your repayment options.
It is important to know that there are sources of advice and assistance out there to help you. A good first point of contact for impartial advice is your local Citizens' Advice Bureau, who can provide general financial advice and details of more specialist services, should it be required. Other options to consider might include some kind of 'mortgage rescue' scheme, whereby the scheme provider will buy your home and rent it back to you, allowing you to remain in your own home. However, as with all financial products, it is vital that you take impartial advice before signing up to one of these schemes in order to ensure it is the right option for you.
