Selling a House with a Mortgage – What’s Your Game Plan?
After years of investing in your property’s equity – the value of your home minus any debts against it – the idea of now selling it becomes challenging, particularly when a mortgage is involved. This blog aims to provide clear, unbiased information to help you assess whether this move aligns with your financial and personal goals. We’re here to guide you through the key considerations, empowering you to make an informed choice.
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Can you sell a home with a mortgage?
“If you’re wondering, ‘Can I sell a house with a mortgage?’, the answer is yes, you certainly can. Selling a home with a mortgage is actually quite common. The key factor here is your home equity. Imagine your home is currently valued at $400,000, and your remaining mortgage balance is $200,000. In this case, your equity in the home would be $200,000. This amount represents the portion of your home’s value that you truly own – the difference between its market value and what you still owe on the mortgage.
When you sell, remember that closing costs, including realtor commissions (if you choose to work with one), will be deducted from your equity. Therefore, it’s important to ensure your equity is enough to cover all of this and the remaining mortgage balance.
For those looking to buy another property, you have two options: use the sale proceeds to pay off the existing mortgage and then use any leftover funds for the new property, or ‘port’ your mortgage to the new property. The choice depends on what’s more viable for your situation.
How does selling a house with a mortgage work?
What happens when you sell a house with a mortgage? You can either pay off the mortgage with the sale proceeds, ‘port’ the mortgage to a new property, or remortgage entirely (this means paying off one mortgage by taking out another mortgage on the same property).
Start by filling out a Discharge of Mortgage form with details like your name and loan account number. This process, taking 14-21 days, lets your bank prepare to clear the mortgage at sale. Then, your bank works with your legal representative to pay off the mortgage from the sale. Additionally, the lender will register the discharge of the mortgage with the Land Titles Office, ensuring the property is free of any encumbrances (a legal burden or claim on your property that can affect your ability to sell or use the property freely). Discharge fees can range from $0 to $550.
Selling your house with a mortgage can be simplified and faster when working with We Buy Houses. We offer a direct purchase, meaning you can avoid the lengthy market listings, open houses, repairs and cleaning. This ease and efficiency make us an ideal solution for those looking to sell their mortgaged property with minimal stress and maximum convenience.
What should you consider before selling a house with a mortgage?
Before selling a house with a mortgage, there are several important factors to consider:
- Sale Price vs. Mortgage Balance: Ensure the sale price is higher than what’s left on your mortgage. The sale proceeds will be used to clear the mortgage, and if the selling price doesn’t cover it, you’ll still need to make payments.
- Impact on Financial Aid: If you’ve recently lost your job or experienced a significant income drop, be aware that the lump sum from the sale could affect your eligibility for certain types of government or financial aid.
- Negative Equity: If your mortgage balance is higher than your home’s value (negative equity), selling might not be the best choice because you’ll owe more than the house’s worth.
- Increase Equity: Consider making an extra mortgage payment each year, applying it directly to the principal. This reduces the interest you pay over time and boosts your equity faster.
4 Steps to selling a home with a mortgage
- Request a Mortgage Payoff Statement: Start by reaching out to your mortgage lender to request a payoff statement. This document will detail exactly how much you need to pay to fully settle your mortgage as of the sale date.
- Assess Your Home’s Market Value and Net Proceeds: Get an idea of your home’s current market value. This will help you understand how much you might earn from the sale. Subtract any expected costs (like closing fees) from this estimated sale price to calculate your net proceeds.
- Contact Real Estate Agents or We Buy Houses: Decide how you want to sell your home. You can work with a traditional real estate agent or opt for a service like WeBuyHouses for a quicker, more direct sale process.
- Finalize the Sale and Settle Your Mortgage: Once you’ve sold your home, use the proceeds to pay off your mortgage balance as per the payoff statement. Any remaining funds are yours to keep or reinvest as you see fit.
What fees should you factor in?
When selling a house with a mortgage, it’s essential to consider the various fees and costs associated with the process, depending on whether you choose to work with a traditional real estate agent or opt for a service like We Buy Houses. Here’s a breakdown of the fees you should be aware of:
If You Choose a Real Estate Agent:
- Legal Costs: Budget around $800 to $2,000 for legal and conveyancing services, depending on where you live.
- Agent Fees: Real estate agents charge a fee based on the sale price, discussed upfront.
- Marketing Expenses: Agents will help with a marketing campaign for the sale, including brochures, listings, photos, and ads. Costs of these vary according to the length of the campaign.
If You Choose We Buy Houses:
When you opt for a service like ours, the fee structure is more straightforward and streamlined. You won’t have to worry about:
- Agent Commissions: Since you’re selling directly, there are no real estate agent commissions to pay.
- Repair Costs: We will buy your house with a mortgage in any condition, so you don’t need to spend money on repairs or renovations.
It’s crucial to weigh the costs and select an option that aligns best with your goals and priorities when selling your home.
Pros and cons of selling a house with a mortgage
Selling a house with a mortgage is a decision that comes with its own set of advantages and drawbacks. Let’s break down the pros and cons to help you make an informed choice:
Pros of Selling with a Mortgage
- Debt Relief: If you’re behind on mortgage payments, selling can stop repossession and clear your debt.
- Affordable Living: Life changes can make your current mortgage unaffordable. Selling can free up cash for a more budget-friendly home.
- Cash for a Fresh Start: Depending on your home’s value, selling might not only cover your mortgage but leave you with extra cash.
Cons of Selling with a Mortgage
- Stressful Mortgage Shortfall: Falling behind on payments can lead to a mortgage shortfall, causing stress and costly legal expenses.
- Lower Sale Price: If your financial circumstances require a quick sale, your house may fetch a lower price than its market value, resulting in a financial loss.
- Ongoing Mortgage Payments: You’re responsible for mortgage payments until your house is sold, even if you’ve moved elsewhere.
Before deciding, weigh these factors. It’s a significant move, so consult experts or financial advisors for personalized guidance based on your situation. Remember, we’re here to help you! Selling your house with a mortgage should align with your financial goals and circumstances.
How long does it take to get an offer for a house with a mortgage?
In the Bay Area, the time it takes to get an offer accepted on a house with a mortgage can vary significantly depending on several factors, including:
- Current market conditions: A competitive market with high demand and low inventory translates to longer search times and potentially more negotiation before your offer gets accepted.
- House specific factors: Desirable properties in prime locations are likely to receive multiple offers and require stronger bids.
- Your buying strategy: Being pre-approved for a mortgage, being ready to move quickly, and being flexible on your must-have features can help expedite the process.
With these factors in mind, the average time to get an offer accepted in the Bay Area with a mortgage is typically between 3 and 6 months. If you’re looking for a rapid sale, We Buy Houses hassle-free and quick process is the best option for you.
Selling a house with a mortgage is 100% possible, and it doesn’t have to be such an overwhelming process. In this article, we’ve shown ways to make it less intimidating. Remember to stay well-informed throughout the entire sale process and consider options that offer simplicity, peace of mind, and speed.
We offer a clear path to selling your property quickly, efficiently, and with minimal stress. If you’re looking for a way to unlock the value of your home, we can provide you with guidance, knowledge, and a successful sale.
Selling House With Mortgage FAQ'S
Of course. Selling a house with a mortgage is a common option While the mortgage lender retains the title until the loan is paid off, selling the house allows you to settle the debt and potentially start with a clean slate.
Overall, while having a mortgage can introduce additional steps and considerations, it does not block the sale of your home. Careful planning, understanding your financial obligations, and consulting with financial experts can help you get a successful sale.
No, it’s not mandatory to clean your house before selling it, but cleaning can improve the home’s appeal if you’re selling through traditional real estate channels. However, if you’re selling to We Buy Houses, we’ll buy your home as-is, in any condition.
If you sell through a traditional real estate agent you will need to pay commission fees. If you sell to a direct buyer like us you won’t have to pay any realtor commissions.
Yes, when selling a house with a mortgage, you usually need to pay closing fees. These fees can include title search, attorney fees, transfer taxes, and escrow expenses. The exact amount varies, but it’s often a percentage of the sale price.
Absolutely! We specialize in purchasing homes directly, regardless of whether there’s an outstanding mortgage or any other condition.
Selling a house with a mortgage to us is straightforward. You contact us about your property, we make an offer, and once you accept, we proceed to handle the paperwork and pay off your mortgage directly from the sale proceeds. The process is quick and requires minimal effort from you.