Can I Sell My Home if I Still Have a Mortgage?
The majority of people won’t live in the same home for 25 or 30 years, which is the typical life of a mortgage loan. So, when it comes time to sell, many homeowners still have mortgage debt to deal with. Once you signed your name on those mortgage documents you are responsible for paying back the money, so how exactly does this whole process work?
Well it is actually pretty straight forward: you can pay your mortgage loan back with the money you gain from selling your home.
Although it might not feel like it at the time the fact of the matter is that selling a house with a mortgage is a common occurrence. Consult with your mortgage lender and your real estate agent to find out how you can sell a home with a mortgage. In the meantime, here are a few tips to help you out along the way.
Find Out the Details of the Mortgage that You are Already in
Your mortgage payoff amount is the exact amount of money, (including accrued interest) that you owe to your lender. This amount is typically good for 10-30 days and represents the outstanding loan balance that you must pay. It is crucial that you know this number as the absolute last thing you want to do is default on your mortgage.
There are important clauses to look for in your mortgage documents and it is the “due-on-sale clauses”. These are important because they reveal the exact rules of how to sell a house you still owe money on. It covers such information as when the paid-in-full loan is due and what the process is, including any fees. However, there are a few details that the clauses won’t include such as who you who you can or can’t sell your home to, but your bank might need some additional information about the buyer’s mortgage lender. Be sure to ask any questions you might have about these clauses, so you have a full understanding before you take the first steps to start your sale.
The Selling Process
Once you know the ins and outs of your loan terms, it’s time to get to actually selling a house with a mortgage, which can get slightly complicated. First, you’ll want to work with what is called a title company.
How often your lender will set you up with one, but if they don’t, you can hire an agent on your own. This agent will be responsible for ensuring that there are no issues with your property’s title, and act as the intermediary throughout the entire purchase and sale process.
There are Three Major Things that then Happen to Your Mortgage
-The title agent holds the money from the new buyer throughout the sale
-Once you have signed all the documents at the closing table, the title agent then uses the sale money to pay your current mortgage holder
-Once the amount has been paid, the title transfers to the buyer and you, as the seller, are given the leftover money, minus any additional fees.
It Should be Noted that if the sale covers the entire cost of the current loan, the entire process generally goes quite smoothly. However, if you owe more than your home is actually worth meaning you have negative equity, there could be some trouble. When this happens you will have to work out a deal with your lender for a reduced payoff amount, or you may need to refinance and stay in your home for longer than you planned.