Introduction

If you have been stung by an unforeseen mortgage shortfall debt, you could ask your lender to accept a full and final settlement offer. Our letter template has been composed to easily explain your circumstances and why a settlement offer is good for everyone involved. 

All you need to do is download the right template for your situation (single or joint mortgages), add some relevant information and send it off. Our free template will save you time and worry. 

However, if you want more information about your mortgage shortfall debt or dispute a mortgage shortfall, you should use our other effective letters to mortgage lenders. 

Letter Template

To Whom It May Concern

Regarding Case #: [your case number]* (required)

I am writing about the money which you are claiming I owe on the above account.

I can confirm that I am unable to offer to pay in full what I owe.

[include a paragraph explaining your circumstances and details of your financial situation that you want the creditor to take into account.]* (required)

However, I can raise £[put the amount which you can afford to pay.]*. (required) and I want to offer this as an ex-gratia payment in full and final settlement of the account.

This offer is made on the clear understanding that, if accepted, neither you nor any associate company will take any further action to enforce or pursue this debt in any way whatsoever and that I will be released from any further liability.

I also request that, if accepted, you will make an entry on my credit reference agency file relating to the above account as ‘satisfied’ in full.

Payment can be made within [put the number of days or weeks within which you will pay.]* (required) of receiving your written agreement to this offer. Please indicate your preferred method of payment.

I look forward to hearing from you.

Yours sincerely


Downloadable Resource

The download links below take you to a Google document template where you can make a copy or save in any document format you like. Note, you may have to login to your Google account.

Download – Single (for one person)
Download – Joint (for couples)

What is a mortgage shortfall debt?

In a nutshell, a mortgage shortfall is when a mortgage lender repossesses your home because you have not kept up with repayments. The lender then sells the property to recover the money they lent to you to buy it in the first place. If they sell the property for less than is left on the mortgage, the difference is the mortgage shortfall. This is then a debt that can be passed back to you. 

What is a full and final settlement?

A full and final settlement is when you and your lender agree on a figure to pay off the debt. The offer will be below the total value of the debt, meaning the lender writes off part of the debt and will not chase you for the money you didn’t pay in the future. It’s a way to pay off your debt without paying back everything. 

Our free letter template will help you make a full and final settlement offer to a mortgage lender. Download it now to make your proposal. 

Is a full and final settlement legally binding? 

If you have agreed in writing a full and final settlement offer and then make the full payment of that offer, the lender will not be legally allowed to chase you for more money later. Always make sure you have the full and final settlement offer in writing from the lender as well, and read over any terms they may include. 

How much should I offer as a full and final settlement? 

There is no magic figure that all mortgage lenders will accept as a full and final settlement. You should probably not offer lower than 75%, but always explain the details of why you are making your offer. If it is unlikely that the lender will get more money from you by not accepting your offer, make that clear to improve your chances of your offer being accepted.

Before you make a settlement offer…

Before you make a settlement offer for mortgage shortfall debt, make sure that the debt is still enforceable. The Limitations Act states that the capital for the mortgage shortfall must be collected within 12 years or never chased again. And any interest should be recovered within six years.

Moreover, the mortgage provider must tell you about the debt within six years of the property sale, as stated by the FCA. 
We have an alternative letter template if you want to tell a lender that time has run out.

About the author

Scott Nelson

Scott Nelson is a financial services expert, with over 10 years’ experience in the industry, including 6 years in FCA regulated companies. Read more
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