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At a glance: What to do when the money left after selling your home won’t cover what you owe on your mortgage.
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This summary is not relevant in England and Wales
For a version of this summary that covers England and Wales, please click here.

What is a mortgage shortfall?

If you have had your home repossessed or you have handed back the keys to your mortgage lender, you may be told you still owe money. This happens when the amount your home is sold for is not enough to pay off the mortgage. The money you owe is called a mortgage shortfall.  

Sometimes mortgage shortfalls also include:  

  • The monthly instalments and interest added while your home is being sold.   
  • Legal and estate agents’ fees.  

How long can I be pursued for the debt?

There are rules about how quickly a lender should contact you after sale of the property if they want to recover the shortfall.  

In Scotland, there are different legal views about whether a lender has 5 or 20 years to take court action to recover a mortgage shortfall debt. This is a complicated area of law and you should seek legal advice. Contact us for advice about how to find the right type of legal help.  

What can I do?

If your lender hasn’t been in touch for some time, it would be best to speak to us before contacting them. Writing to the lender can reset the time limits for taking court action.   

  • Work out when you last made a payment or acknowledged the debt. If you think your lender cannot pursue the debt because they are out of time under Prescriptions and Limitations Act 1973, seek legal advice. 
  • Check if your mortgage lender is a member of UK Finance. If they are, there are rules about when they can ask for the shortfall to be repaid.  
  • Has your lender written to you within five years of the sale saying there is a mortgage shortfall and that they intend to recover the debt? If you did not receive a letter, you may be able to complain. 

If your lender is chasing you for payment and you know that your lender hasn’t run out of time, you can write to your lender for a breakdown of what they say you owe. We have sample letters you can use for this. These are worded very carefully so there is less chance of you saying something that would give your lender more time to take court action. You should ask for: 

  • The exact sale price of the house. 
  • Details of any valuations.  
  • How your lender has worked out the interest.  
  • Any fees or costs that have been added on. 

Look at all the figures and see if the correct procedures have been followed. There are lots of different ways that you may be able to deal with anything that is still owed.  

You may be able to: 

  • Complain if things haven’t been worked out properly or your lender hasn’t followed the rules.   
  • Agree to pay the money back at a rate you can afford.  
  • Pay a lump sum to settle the debt for less than you owe.  
  • Ask the lender to write off the debt if you can’t afford to pay anything.  
  • Use another debt solution to give you more time to pay or get some or all of the debt written off.   

Learn more about this topic

If you want to learn more about this topic, you can read our in-depth guide.

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