Can You Sell a House with a Mortgage?
What happens to your mortgage when you sell your home? Can you sell your home while you still have a mortgage? Many homeowners don’t think about what will happen to their mortgage if they decide to sell their home before the house is paid off. Selling your home can be overwhelming, so it is worth looking at what you need to do with regards to your mortgage early in the process.
Understand Your Mortgage
Your mortgage isn’t as simple as most people think. You don’t pay an equal amount of the principal each month. Rather, in the beginning of the loan, you will pay more toward interest and only a small amount toward the principal. When you begin the process of selling your home, look at your mortgage statement to see what your principal balance is, as well as your payoff amount. You can’t assume that because you have paid ten years on a thirty-year mortgage that you are a third of the way toward what you borrowed. Mortgages don’t work like that. Make sure you understand your current mortgage – those numbers will be important. Talk to your mortgage holder to find out if you have a prepayment penalty for paying off your loan early, and exactly what your payoff amount is.
Set Your Sale Price Right
This is where your agent is extremely helpful. If you know your payoff amount, as well as how much profit you will need to put a down payment on a new home, plus cover your closing costs, selling expenses, and moving costs, you can set a sale price that will cover your financial obligations comfortably. Your agent will make sure that your home is priced right for the current market and can help you with all the numbers.
What Selling Your Home Does to Your Current Mortgage
When you sell your home, you will use the proceeds from the sale to pay off your mortgage. If you don’t sell your home for enough to do this, you will need to cover the difference (either through money you bring to the table, making payments to the bank, or other options your lender will discuss with you). If you have a purchase price greater than what you still owe, you will pay off the current mortgage and leave the closing table with the remaining sale proceeds as profit.
What Are Your Responsibilities Before Closing?
The buyer will be getting their financing finalized and preparing the remainder of their down payment, but the seller has responsibilities in the mortgage process too. First off, until the day the home transfers ownership, you are responsible for paying the mortgage during the escrow time period. This is not the time to lapse on your responsibilities. You will need to call your lender, let them know that you have sold the house, and ask for a payoff amount as of the day of the closing. Mortgage payoff amounts change, and having the right information is crucial. At the closing, after a title search, the title agent will send your final payment on your behalf and transfer the title to the buyer.
Most sellers, especially in today’s seller’s market, will be able to sell their home and pay off their mortgage without issue, but your agent is the best one to help you understand the process and what will happen throughout the sale. If you have questions about selling your home, we’d like to help. Contact Amberwood Real Estate today!