Repossession and how to avoid it Repossession - what not to do

Handing back the keys because of repossession worries may not mean the end of your debts 

Getting the mortgage lender off your back

Make sure that you don't agree to pay back more than you can afford to, just to get the lender off your back. There is sometimes strong pressure to do this.

However, if you can't keep up these new repayments because they're unrealistically high and unaffordable, you'll be in a worse position as, in effect, you'll be defaulting for a second time.

In the long run it's better to stand firm and suggest an affordable level of repayments.

Sale and rent back

A way out of mortgage arrears that is increasingly being resorted to by desperate borrowers is sale and rent back.

A commercial firm buys your property and pays off the mortgage, while offering you the chance to rent it from the firm as a tenant. The price you get is often well below the market value.

This offers you a way of staying in your home but before it was regulated it was fraught with problems. Your security of tenure to remain as a tenant was often illusory. In the worst cases sellers found themselves out of pocket and homeless, with little means of redress.

An Office of Fair Trading (OFT) report into sale-and-rent-back firms in 2008 highlighted some of the major faults with these schemes. The OFT's report recommended statutory regulation of these companies, which should produce clear contracts about property values and tenancy terms.

It also wanted companies to advise potential customers to get free independent financial advice before signing contracts.

The Financial Services Authority announced a timetable for the regulation of these schemes in February 2009. Full regulation has been in place since 30 June 2010.

Before considering sale and rent back, speak to your mortgage lender and independent experts such as Citizens Advice, the Consumer Credit Counselling Service (CCCS), National Debtline and Shelter England or Shelter Scotland to consider other solutions. Also see our guide on how to deal with debt.

Visit our guide on sale-and-rent-back schemes for more on this.

Handing back the keys

If you decide to simply hand back the keys and leave your lender in possession of your property, you can still be held liable for any shortfall, despite perhaps feeling you've made a clean break.

Take advice from a debt adviser if you are left with a shortfall as it may be possible to get your lender to write it off.