Can You Sell a House With a Mortgage?

If you’re considering selling your home but still have an outstanding mortgage, you might be wondering if you can sell a house with a mortgage. The answer is yes, you can. Selling a property with a mortgage might seem complicated, but with the right information and preparation, it can be a smooth process.

This guide will walk you through everything you need to know about selling a house that has a mortgage attached.

Can You Sell a House With a Mortgage?

Selling a home while you still owe money on it is a common scenario in real estate. When the house is sold, the proceeds from the sale are used to pay off the mortgage and any other related costs. The key is to ensure that the sale price covers the remaining mortgage balance and any associated expenses.

Steps to Selling a Home With a Mortgage

Here’s a comprehensive breakdown of the steps involved:

1. Determine Your Remaining Mortgage Balance

Freepik | rawpixel.com | Calculate your remaining loan balance to understand your home equity and potential profit from the sale.

The initial step in selling a house with a mortgage is to find out your current loan balance. This figure is essential for understanding how much of the sale proceeds will be used to clear your mortgage. To get this number:

• Check Your Loan Statement –  Your mortgage statement will detail the remaining balance.
• Contact Your Lender – For the most accurate payoff amount, reach out to your lender, as they can provide a payoff quote that includes any accrued interest.

2. Timing Your Sale

Choosing the right moment to sell involves considering several factors:

• Reason for Selling – Whether moving for a job, upsizing, or downsizing, your urgency may influence your decision.
• Market Conditions – Assess whether you are in a buyer’s or seller’s market. High demand and low inventory may allow you to price higher, while a saturated market might require a more competitive price.
• Availability of New Homes – If you’re buying another home, ensure that the market conditions are favorable for both selling and buying.

3. Setting a Competitive Listing Price

4. Preparing Your Home for Sale

5. Understanding Closing Costs

Sellers often bear certain costs during the closing process:

• Agent Commission – Typically around 6% of the sale price, this fee is split between the buyer’s and seller’s agents.
• Title Insurance – This protects the buyer against future claims on the property and is often paid by the seller.
• Escrow Fees – Funds held in escrow ensure that both parties meet their obligations. These fees are usually shared.
• Prorated Taxes and HOA Dues – Depending on the timing of the sale, you might need to cover a portion of property taxes or HOA dues.

6. Paying Off the Mortgage

Once the sale is complete, the mortgage balance will be paid off with the proceeds. Ensure you get a payoff quote from your lender, which will include the amount needed to settle the mortgage up to the sale date. If there are other liens, such as for unpaid taxes or contractor work, those will also need to be settled.

7. Utilizing the Remaining Proceeds

After paying off the mortgage and any other liens, you can keep the remaining funds. These proceeds can be used for various purposes:

• Savings – Place the funds into savings for future use.
• Debt Repayment – Use the money to pay off other debts.
• Down Payment – Apply it towards a down payment on a new home.

Dealing with Negative Equity

Freepik | jcomp | Get an updated payoff quote to ensure accurate mortgage settlement from your home sale proceeds.

If you owe more on your mortgage than the home is worth, selling becomes more challenging. This situation, known as negative equity, means you will need to cover the difference between the sale price and your mortgage balance out of pocket. If possible, wait until the home’s value increases before selling to avoid additional financial strain.

Short Sales and Foreclosures

For those struggling with mortgage payments, a short sale might be an option. This involves selling the home for less than the mortgage balance with lender approval. While less damaging than foreclosure, a short sale can still impact your credit and future mortgage opportunities. Contact a financial advisor or mortgage specialist for guidance in such situations.

Qualifying for a New Mortgage

If you need to secure a new mortgage before selling your current home, lenders will evaluate your debt-to-income ratio (DTI) and credit score. A higher DTI may affect your ability to qualify for a new loan. In most cases, it’s advisable to sell your existing home before applying for a new mortgage to avoid complications.

Selling a house with a mortgage is a manageable process when approached with the right information and planning. From understanding your mortgage balance to preparing your home for sale, every step is crucial to ensuring a smooth transaction. Consult with a real estate agent for personalized advice and to help navigate the sale. By addressing these aspects, you can successfully sell your home and move on to your next adventure with confidence.