What Happens To Your Mortgage If You Sell Your Home
With the way the housing market is these days, many people don’t stay in their homes until their mortgage is paid off. This can leave some sellers wondering if they can sell while still owing money on the property. (Selling A House With A Mortgage)
Even if you’re a seller, the answer is still yes – but read on for more information. Below is an explanation of what will happen to your mortgage when selling a house with a mortgage.
What Happens In a Typical Sale – Selling A House With A Mortgage
To put it lightly, in a regular sale, you should be able to make more money from selling your home than what you currently owe on your mortgage.
If you’ve been paying off your mortgage little by little over the years, then you would have built up equity in your home– and that’s something you can cash in on when selling a house with a mortgage.
At closing, the sum of the down payment and mortgage loan must cover the selling price of the home. This money is then used to pay off:
- The mortgage amount that you still owe
- If you have any home equity loans or HELOCs, these will also affect your mortgage refinancing options.
- Closing costs (including agent commissions and taxes)
Anything leftover after those debts are paid off will go to you as a profit. You can use that money however you want, whether it’s for a down payment on a new home or something else entirely.
What Happens In A Short Sale When Selling A House With A Mortgage
A short sale transpires when a house is sold for an amount that’s lower than the total debt against the property. To carry out a short sale, you as the owner must contact your mortgage company and request them to accept less money than what they are owed because the proceeds from selling the home will be insufficient.
A short sale happens when you sell your house for less than the outstanding balance on your mortgage. Typically, in this situation, the bank has to approve any offer before you can move forward with a sale. This part of the process can often take longer than anticipated.
What Are The Consequences Of Buying And Selling A House At The Same Time?
If you sell first
Most people say it’s easier to sell your old home before buying a new one. This way, you get the money from selling your old house as profit, which can then be used as the down payment for your new home.
If you buy first
Keep in mind that you’ll have to put forth a bit more effort if you purchase first and then try to coordinate the rest of your moves.
If you don’t have the cash readily available from your home’s sale to cover the down payment and closing costs for a new property, you’ll have to finance it using one of these options:
- Use a home sale contingency:
If you’re writing an offer on a new home, you can include a home sale contingency. This means that you have to find a buyer for your old home before you can settle on the new one.
Although you are allowed to back out of the contract if you can’t find a buyer, remember that sellers may be less likely to accept your offer if they know this clause exists.
- Get a bridge loan:
A bridge loan is a short-term loan that can help with an old mortgage and a new home down payment. Then, the sale of the old home can be used to pay off the bridge loan.
- Carry two mortgages:
Having to hold two mortgages at once may not be ideal, but if you can afford it financially, it could be the best way to buy a new home without being restricted by a sale contingency.
Strategies To Pay Off Your Mortgage While Selling A House With A Mortgage
If you still owe money on your mortgage when selling a house with a mortgage, it’s not as easy as just handing over a check to the bank. There are a few extra steps involved that you’ll need to complete first.
1. Ask for the payoff amount
Before listing your house for sale, you first need to call your lender and request the payoff amount. This is how much money you still owe on your loan. You’ll use this figure when deciding how to price your home so that there’s enough left over at closing to pay off the debt in full.
2. Do a title search
Once your lender assigns you a title agent, they will begin researching any potential issues with your title. Afterward, you will need to provide them with your payoff amount and account number.
3. Close
The title agent will send in your final mortgage payment after you sign all the necessary papers for closing. Then, to finish everything off, the agent will transfer the title over to the buyer.
And that’s it! The behind-the-scenes look at what happens to your mortgage when selling a house with a mortgage is now known by you. So pick up that phone and get calling your lender so they can give you that payoff amount!
Contact Experienced Real Estate Agent in Chilliwack
If you want to discuss selling a house with a mortgage, please contact The Best Homes On Earth Team today. We are one of the leading Chilliwack real estate agents. We have years of experience helping people sell and buy their houses.