If you are struggling to keep up with your mortgage and have already fallen into arrears, you may start considering whether selling the property could resolve the situation.

One of the most common questions in this position is:

Can you sell a house with mortgage arrears in the UK?

In many circumstances, a property can be sold while mortgage arrears are outstanding. However, the practical position depends on the mortgage balance, the property’s value, the amount of arrears, any other secured borrowing, the stage the lender’s recovery process has reached and whether the expected sale proceeds will be enough to deal with the mortgage.

Selling a property does not automatically make mortgage arrears disappear. The mortgage normally needs to be dealt with as part of the sale, and if the sale proceeds are insufficient to repay what is owed, a mortgage shortfall can remain.

The earlier the situation is understood, the more opportunity there may be to discuss a managed sale with the lender rather than allowing the matter to progress further.

Can You Sell a Property While You Are in Mortgage Arrears?

Being in mortgage arrears does not necessarily mean that you cannot sell your property.

If you decide that selling is a realistic way of dealing with your financial position, you should contact the mortgage lender and explain the situation.

The lender has an interest in the mortgage being repaid, and the sale of the property can potentially provide the funds needed to redeem the mortgage.

The Financial Conduct Authority’s mortgage rules require lenders dealing with customers in payment difficulties to make reasonable efforts to reach an agreement over repayment of payment shortfalls and, where no reasonable payment arrangement can be made, to allow the customer a reasonable period to effect a sale.

This does not mean that every proposed sale will automatically be accepted on any terms. The circumstances and the lender’s requirements still matter.

Does the Lender Have to Agree to the Sale?

A borrower should not assume that simply putting the property on the market resolves the mortgage problem.

The lender will normally need to be involved in the redemption of the mortgage because the mortgage is secured against the property.

If the property is sold, the mortgage is normally redeemed from the sale proceeds at completion.

MoneyHelper explains that when a mortgaged property is sold, the conveyancer or solicitor normally deals with paying off the existing mortgage using the lender’s redemption figure.

If you are already in arrears, it is sensible to tell the lender what you are proposing rather than waiting until the sale is close to completion.

This is particularly important if the lender has already started recovery or possession action.

What Happens to the Mortgage When You Sell?

When a property is sold, the mortgage normally needs to be repaid from the proceeds.

The lender will provide a redemption figure, which represents the amount required to repay the mortgage at a particular point in time.

The figure can include the outstanding mortgage balance together with applicable interest, fees or other amounts due under the mortgage.

MoneyHelper explains that on completion the solicitor or conveyancer normally uses the sale proceeds to pay off the previous mortgage and other relevant costs.

For someone in arrears, the important question is therefore:

Will the net sale proceeds be enough to cover everything that needs to be paid?

That calculation should be made before relying on a proposed sale as the solution to the arrears.

What If There Is Enough Equity?

If the property is worth substantially more than the amount owed on the mortgage, there may be enough equity to repay the mortgage and arrears from the sale.

For example, suppose a property is worth £300,000 and the total amount required to redeem the mortgage, including the arrears and applicable costs, is £220,000.

There may be around £80,000 of gross equity before considering selling costs and any other secured debts or charges.

The exact amount available to the homeowner would depend on the actual sale price and all costs and liabilities that have to be paid.

This is why obtaining an up-to-date mortgage redemption figure and understanding the likely selling costs is important before making decisions.

What If the Property Is Worth Less Than the Mortgage?

This is a more difficult situation.

If the property is worth less than the amount owed to the mortgage lender, the borrower may be in negative equity.

MoneyHelper defines negative equity as a situation where the amount owed to the mortgage lender is greater than the value of the property.

For example, if a property is worth £200,000 but the mortgage balance is £220,000, there is a £20,000 difference before considering any additional costs.

Selling the property for £200,000 would therefore not, by itself, produce enough money to repay a £220,000 mortgage balance.

In such circumstances, the borrower may need to discuss the shortfall with the lender.

MoneyHelper warns that someone in negative equity who needs to sell may need to find another way to pay the difference owed to the lender.

What Is a Mortgage Shortfall?

A mortgage shortfall occurs where the amount obtained from the sale of the property is not enough to clear the amount owed to the lender.

For example, imagine:

• Property sale price: £180,000
• Mortgage and arrears to be repaid: £195,000
• Shortfall: £15,000

The £15,000 does not automatically disappear simply because the property has been sold.

The treatment of the remaining debt will depend on the circumstances and the arrangements made with the lender.

This is particularly important for borrowers who believe that selling their property automatically ends all mortgage liability.

It may not.

Can You Sell Before Repossession Proceedings Start?

If selling the property is being considered, acting before the situation reaches possession proceedings can provide more time to arrange the sale.

A voluntary sale may give the homeowner more opportunity to obtain a proper market valuation, appoint an estate agent, consider offers and work with the lender and conveyancer to complete the transaction.

This does not mean that selling is always the right solution.

The borrower should first understand whether the sale would actually resolve the financial problem and whether alternatives such as an affordable payment arrangement may be available.

MoneyHelper advises borrowers who are struggling with mortgage payments to contact their lender as soon as possible, and says lenders must make reasonable attempts to reach an agreement about repayment.

What If the Lender Has Already Started Possession Proceedings?

The position becomes more urgent if court or possession proceedings have already started.

A borrower should not assume that putting the property on the market automatically stops the court process.

You should establish exactly what stage the proceedings have reached, comply with any court deadlines and communicate with the lender about the proposed sale.

The FCA’s MCOB rules are particularly relevant here. They state that where no reasonable payment arrangement can be made, the lender should allow the customer a reasonable period to effect a sale, and that the lender should not repossess unless other reasonable attempts to resolve the position have failed.

That does not mean that a borrower can indefinitely delay possession simply by saying that the property is for sale.

The proposed sale needs to be realistic and capable of progressing.

Can You Sell After Receiving a Possession Claim?

A possession claim does not necessarily mean that the property cannot be sold.

However, once court proceedings are underway, timing becomes particularly important.

The borrower should obtain information about the current mortgage balance, arrears, legal costs and likely redemption figure, and should communicate with the lender about the proposed sale.

If there is a realistic buyer and a reasonable prospect of completion, this information may be relevant to discussions with the lender.

You should also understand that the court process and the sale process are separate matters.

A property being marketed for sale does not automatically cancel a possession claim.

If you have received court papers, professional advice about the specific proceedings may be appropriate.

What If the Sale Proceeds Will Clear the Mortgage?

This is generally a much more straightforward situation.

Suppose:

• Estimated sale price: £350,000
• Mortgage redemption figure: £250,000
• Mortgage arrears included in the amount due: £10,000
• Other sale costs: £15,000

There could potentially be sufficient proceeds to repay the mortgage and associated costs, leaving funds for the owner.

The actual figures will vary, and an estimated market value is not the same as the final sale price.

It is therefore important to work from realistic figures rather than assuming that the property will achieve the highest possible valuation.

What If the Sale Proceeds Will Not Clear the Mortgage?

If the expected sale price is below the amount required to redeem the mortgage, the situation needs to be discussed with the lender before proceeding.

A lender may need to consider how any shortfall will be dealt with.

The borrower may need to contribute funds, agree a repayment arrangement or explore another solution depending on the circumstances.

The FCA’s MCOB rules expressly refer to both payment shortfalls and sale shortfalls, requiring firms to make reasonable efforts to reach an agreement about how such a shortfall should be repaid.

This is an important distinction because selling a property in negative equity does not necessarily eliminate the remaining debt.

What About Other Secured Loans?

The first mortgage may not be the only debt secured against a property.

There could potentially be a second charge, secured loan or another form of registered charge.

MoneyHelper explains that where a property with a second mortgage is sold or repossessed, the first mortgage is paid first before money is available for the second mortgage.

This means that calculating available equity requires more than simply comparing the property value with the first mortgage balance.

Any other secured borrowing and relevant charges need to be taken into account.

Should You Get a Property Valuation?

If you are considering selling because of mortgage arrears, it is sensible to establish a realistic idea of the property’s current market value.

A single valuation should not necessarily be treated as a guaranteed sale price.

You may wish to speak to more than one established estate agent and consider comparable properties and the likely time needed to sell.

The objective is to understand whether the expected sale proceeds are likely to cover the mortgage and associated costs.

This is particularly important where the difference between the property’s value and mortgage balance is relatively small.

Be Careful With Quick-Sale Offers

Someone experiencing mortgage arrears may receive advertisements or approaches from companies offering to buy the property quickly.

This can appear attractive when repossession is a concern, but a quick sale may involve selling the property below its normal market value.

The FCA warns that quick-sale companies can target people who are behind with their mortgage and that some offers may involve significant discounts. The FCA advises borrowers to be cautious and to consider other options, including speaking to the lender.

MoneyHelper similarly recommends considering alternatives before using a quick-sale service and suggests obtaining lower-price estimates from traditional estate agents for comparison.

A quick sale may be suitable in some individual circumstances, but the price, fees and contractual terms should be understood before agreeing to anything.

What About Sale and Rent Back?

Another option that may be offered to someone struggling with mortgage payments is a sale-and-rent-back arrangement.

Under this type of arrangement, the property is sold but the former owner becomes a tenant.

This can appear attractive because it may allow someone to remain in the property after the sale.

However, there are significant risks.

MoneyHelper explains that sale-and-rent-back arrangements can involve selling at a discount, rent increases and the possibility of having to leave when the tenancy ends.

The FCA also regulates certain sale-and-rent-back arrangements and requires consideration of whether an open-market sale would be more appropriate and whether other options have been explored.

Anyone considering such an arrangement should understand exactly what rights they will have after the sale and whether the provider is appropriately authorised.

What Should You Do Before Putting the Property on the Market?

If you are considering selling because of mortgage arrears, it can help to establish the financial position before making the decision.

Start by obtaining an up-to-date mortgage statement and redemption figure.

Find out the total arrears, any charges that have been added and whether there are other amounts that would need to be paid when the mortgage is redeemed.

Then obtain a realistic estimate of the property’s market value.

You should also consider estate agent fees, conveyancing costs, possible early repayment charges and any other costs associated with the sale.

MoneyHelper notes that selling a property can involve estate agent and legal costs and that borrowers should check their mortgage for early repayment or exit charges.

The aim is to establish the likely net proceeds, rather than simply looking at the property’s headline sale price.

Should You Sell or Try to Arrange Payment of the Arrears?

There is no single answer that applies to every borrower.

If the mortgage can realistically be maintained through an affordable arrangement, selling may not be necessary.

On the other hand, if the mortgage is no longer sustainable and there is sufficient equity to clear the mortgage and other liabilities, selling may be one option worth considering.

The FCA requires lenders to consider appropriate options for customers experiencing payment difficulties, including payment arrangements and other forms of forbearance.

Where a reasonable payment arrangement cannot be reached, the FCA rules specifically contemplate allowing a reasonable period for a sale.

The important point is to compare the actual options based on the borrower’s financial circumstances rather than waiting until there is very little time left.

What If Selling the Property Is the Only Realistic Option?

If the property is no longer affordable and a sale appears to be the most realistic way of resolving the mortgage problem, early communication with the lender can be important.

Explain the circumstances and provide information about the proposed sale.

If there is already an estate agent, valuation or prospective buyer, the lender may need to understand the expected timetable.

Keep written records of communications, proposals and agreements.

Do not assume that a telephone conversation means that formal court or possession action has been cancelled.

Where court proceedings are underway, make sure you continue to deal with any court requirements separately.

What Happens After the Property Is Sold?

If the sale proceeds are enough to repay the mortgage and relevant costs, the mortgage can normally be redeemed at completion.

If the proceeds are not enough, a shortfall may remain.

This is why it is important to establish the likely redemption figure and sale price before committing to the sale.

Our earlier article, What Happens to Mortgage Arrears When You Sell Your Property in the UK?, looks specifically at what can happen to arrears, equity and possible shortfalls after a property is sold:

https://www.immediatebankclaims.co.uk/2026/08/31/mortgage-arrears-selling-property-uk/

Understanding the potential shortfall before completion can help avoid an unpleasant surprise after the property has been sold.

Selling a Property Does Not Automatically Remove the Credit History

There is also a difference between clearing the mortgage debt and clearing the historical credit record.

If mortgage payments were missed before the property was sold, the previous payment history may continue to appear on the borrower’s credit file for the applicable reporting period.

Our recent article How Long Do Mortgage Arrears Stay on Your Credit File in the UK? explains the distinction between missed payments, arrears, payment arrangements and defaults:

https://www.immediatebankclaims.co.uk/2026/09/25/how-long-mortgage-arrears-stay-credit-file-uk/

Therefore, a sale may resolve the secured mortgage debt without immediately removing the historical record of previous payment difficulties.

What If You Are Considering Remortgaging Instead?

Selling is not the only possible route.

Depending on the circumstances, a borrower may consider whether remortgaging or another mortgage arrangement is realistic.

However, current mortgage arrears can make remortgaging difficult.

MoneyHelper states that borrowers who are currently in mortgage arrears, or who have missed mortgage payments within the previous 12 months even if they are no longer in arrears, are likely to struggle to remortgage.

Our article Can You Remortgage With Mortgage Arrears in the UK? discusses this in more detail:

https://www.immediatebankclaims.co.uk/2026/08/17/remortgage-with-mortgage-arrears-uk/

Again, the outcome depends on the individual circumstances and the criteria of the lender being approached.

What If Repossession Is Already a Concern?

If mortgage arrears have progressed to the point where repossession is being considered, time becomes particularly important.

Do not assume that waiting for the lender to take the next step will improve the situation.

MoneyHelper advises borrowers to contact their lender as soon as possible when they are struggling with mortgage payments. It also explains that lenders must make reasonable attempts to reach an agreement and that support may be available.

Our detailed guide explains the general stages of the mortgage repossession process:

Mortgage Repossession Process in the UK: What Happens From Start to Finish

https://www.immediatebankclaims.co.uk/2026/06/26/mortgage-repossession-process-uk-2026/

If you are already facing court proceedings, you should obtain appropriate advice about your individual circumstances and the specific documents you have received.

Practical Checklist Before Selling With Mortgage Arrears

Before proceeding with a sale, it can be useful to establish:

Your mortgage position: Find out the current balance, arrears, charges and redemption figure.

Your property’s likely value: Obtain a realistic market valuation rather than relying on an optimistic asking price.

Your likely net proceeds: Consider estate agent fees, conveyancing costs, early repayment charges and other relevant costs.

Any other secured borrowing: Check whether there are second charges or other debts secured against the property.

The potential shortfall: Work out whether the expected sale proceeds will actually clear the amount owed.

The lender’s position: Tell the lender what you are proposing and understand whether any specific arrangements are required.

Any court proceedings: If possession proceedings have started, make sure you understand the current stage and comply with court requirements.

The sale timetable: A proposed sale should be realistic rather than simply being used to delay action.

Any offers received: Consider whether an offer is genuinely sufficient to resolve the mortgage position.

Alternative solutions: Consider whether an affordable payment arrangement or another option could realistically resolve the problem.

Final Thoughts

Selling a house with mortgage arrears can be possible, and in some circumstances a voluntary sale may provide a way of resolving an unsustainable mortgage position before matters progress further.

However, the key question is not simply whether the property can be sold.

The more important questions are whether the expected sale price is sufficient to deal with the mortgage and arrears, whether there are other secured debts or costs, whether a shortfall will remain and whether the lender is being kept informed.

The FCA’s current mortgage rules specifically recognise that, where no reasonable payment arrangement can be made, a customer should be allowed a reasonable period to effect a sale. The rules also require lenders to make reasonable efforts to resolve payment and sale shortfalls and state that repossession should not take place unless other reasonable attempts to resolve the position have failed.

At the same time, borrowers should be cautious about rushed or heavily discounted sales. The FCA warns that quick-sale offers can leave homeowners with substantially less than the property might achieve through other selling methods.

If you are considering selling because of mortgage arrears, understanding the mortgage balance, property value, likely sale proceeds and potential shortfall before committing to a course of action can make the position much clearer.

Disclaimer

Immediate Bank Claims is not a firm of solicitors or barristers; it provides independent support, guidance and assistance relating to property repossession, mortgage arrears, LPA receivers, debt matters and related issues. The content of this article is provided for general information only and does not constitute legal or financial advice. Individual circumstances vary, and appropriate professional advice should be obtained where required.