Secure Loan

[sassylass]

I have a loan secured against my house. I now want to sell the house but there isn't enough equity to clear the loan. Are the lenders allowed to stop me from selling the property?

[dannydingbat]

In most cases, your solicitors will also be acting for the lender. If not, they will istruct their own solicitors (who you will have to pay for). They will only release the deeds to your solicitor to hand over on the basis that they will be returned or the loan will be paid off. It is probably registered land so the land registry will not issue a land certificate unless the charge is removed by the lender as the loan is paid off. Simply, in practical terms, you must pay the loan off or your purchasers will not go through with the deal - their solicitors will make sure of that.

[themas]

I'm not so sure about this. I'm pretty sure that, if the secured loan is in effect a second mortgage (ranking behind the first mortgage), the lender can't prevent a sale. Even for a first mortgage, for them to deny the sale could easily be misguided as it could lead to the mortgage falling into arrears, the house being repossessed by them and then sold - probably for a smaller sum than a normal sale while occupied. This would lead to a shortfall - almost certainly a lot larger than what would occur if they agreed to the sale in the first place.

Why not ask the lender and see what they say?

[Ethel]

You usually need to get your lender's permission before selling. You may also need permission from other creditors if you have secured loans. It may be easier to get this if you have realistic plans to pay off everything you owe. For example, you are planning to sell personal belongings to clear your debts.

Contact an advice agency if your lender won't give you permission to sell. An adviser may be able to help you to negotiate. It may be possible to:

argue that selling privately will allow you to pay off your debts more quickly
convince your lender to let you keep the same mortgage but transfer it to a new property
You could apply for a bigger mortgage to allow you to move to a new property and pay off the negative equity. However, increasing your mortgage will usually increase your debts and mean that you must pay higher interest rates.