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Can You Sell a House With a Mortgage? What Happens & How to Do it Explained

Understanding how to sell a house with a mortgage can be a big challenge for homeowners.

But can you sell a house with a mortgage without encountering financial obstacles?

You can, but the main worry is figuring out what happens to the mortgage and how to handle the selling process smoothly.

So, join us as we dive deep into the essential steps and insights to facilitate a successful sale.

Can You Sell a House With a Mortgage?

Yes, you can sell a house with a mortgage; however, consider the outstanding loan balance, as it directly impacts the sales process. When selling, the proceeds will ideally cover the remaining mortgage balance. If the sale price exceeds the loan amount, you’ll receive the remaining funds after settling the mortgage. 

Conversely, if the sale price falls short, you’ll need to cover the deficit to clear the mortgage before transferring ownership to the buyer.

Is Selling a Home With a Mortgage a Good Idea?

Selling your home with a mortgage can be a good idea, but that depends on two factors: 

  1. Financial standing: If the property’s market value exceeds the outstanding mortgage balance, selling can be advantageous, allowing you to pay off the mortgage and potentially pocket the surplus. 
  2. Assess your long-term goals: Selling may be strategic if it aligns with your relocation plans or financial objectives. Consulting a financial advisor or real estate expert can offer valuable insights tailored to your specific situation.

What Happens When You Sell a House With a Mortgage?

When you sell a house with a mortgage, after the funds have been distributed and the loan has been paid off, you’ll have a new mortgage loan for the purchase of your new property. But note that you aren’t guaranteed to get the new loan at the same rate.

Additional reading: What happens if you inherit a house with a mortgage

Can I Sell a House With a Mortgage if I Am Underwater?

Selling a house on mortgage when you’re underwater — where the property value is below the mortgage balance — can be challenging. In such cases, options like short sales and foreclosures might come into play. 

A short sale in California involves selling the property for less than the outstanding mortgage balance with the lender’s approval. It essentially allows homeowners to sell their property, even when the market value doesn’t cover the mortgage debt. 

This process requires negotiation with the lender, as they agree to accept the lower sale price as a full settlement, forgiving the remaining balance.

While a short sale can mitigate the consequences of foreclosure, it still impacts credit scores and may have tax implications. 

Tax Implications of Selling a House With Mortgage Repayments Outstanding

One of the tax implications when selling a house with an outstanding mortgage is being subject to capital gains tax on any profit from the sale.

However, if you’ve lived in the house as your primary residence for at least two of the past five years, you might qualify for the capital gains exclusion, which could exempt up to $250,000 (or $500,000 for married couples filing jointly) of the gain from taxation.

When You Sell a House What Happens to the Mortgage?

After finding a buyer, the sale proceeds clear the mortgage balance. The lender gets their due, and any surplus goes to the seller. After covering costs, any excess from the sale becomes the seller’s profit. Conversely, if the sale amount is less than the mortgage, the seller must handle the remaining debt.

Can You Sell Your House and Keep the Mortgage?

A common question we see is, “Can I keep my mortgage if I sell my house?”

Typically, mortgages are tied to the property, not the seller. When selling your house, the existing mortgage is paid off with the proceeds from the sale. It’s not possible to directly transfer the mortgage to a new property or keep the same mortgage while selling the house. 

However, you can explore options like porting the mortgage (transferring it to a new property, subject to lender approval) or paying off the existing loan and applying for a new mortgage on another property. 

Additional reading: What happens if you inherit a house without a mortgage

How to Sell a House With a Mortgage

So, how do you sell a house with a mortgage?

Follow these steps to navigate the process smoothly:

1. Assess Mortgage Terms and Outstanding Balance

Before listing the property, review your mortgage terms, outstanding balance, and any prepayment penalties.

Understanding these details in depth will offer a clear financial picture and help estimate the necessary funds required to completely pay off the mortgage upon the sale. 

2. Determine Market Value

Perform a comprehensive comparative market analysis by studying recent comparable sales or seek assistance from a certified appraiser to ascertain the precise market value of your property. 

This diligent evaluation ensures setting an appropriate and competitive selling price aligned with the current market trends, avoiding the necessity of a home price reduction.

3. Consult Your Lender

Initiate a conversation with your mortgage lender to disclose your intent to sell the property.

Engage in discussions about the sale process and inquire about any specific requirements or protocols they might have in place. 

4. List the Property for Sale

Once adequately prepared, collaborate with a respected real estate agent or consider independent selling avenues.

Effective marketing strategies coupled with well-executed property staging are instrumental in attracting potential buyers. 

Highlighting the property’s strengths and presenting it in the best possible light can significantly impact buyer interest.

One alternative option is selling your house for cash. If this is something you’re interested in and you’re in Southern California, get in touch with us!

5. Accept an Offer and Open Escrow

Upon receiving a satisfactory offer, proceed to open escrow with a reputable title company or attorney.

Escrow agents manage the intricacies of legal and financial aspects, ensuring compliance with regulations while safeguarding both parties’ interests throughout the transaction. 

6. Request a Statement of Mortgage Payoff When Selling a House

Initiate contact with your lender to formally request a comprehensive statement outlining the mortgage payoff details.

This document will give you the exact amount needed to clear your loan, covering any interest that’s piled up until the expected closing date.

7. Close the Sale

During the final stages of the sale, the generated proceeds are usually allocated to pay off the existing mortgage.

Trusted title companies or attorneys oversee this critical phase, ensuring seamless disbursement of funds, including the mortgage payoff.

If I Have a Mortgage Can I Sell My House to You?

Absolutely! At SoCal Home Buyers, we understand that having a mortgage, including selling a house with a reverse mortgage, shouldn’t hinder your ability to sell your house.

Whether you’re facing financial difficulties, relocating, or simply seeking a hassle-free sale, we’re here to assist.

Here’s How Our Process Works: 

  1. Give us a call at 951-331-3844—or fill out the short form below—to request your fair cash offer.
  2. Await our prompt response to discuss your property in greater detail and schedule a one-time inspection that allows us to offer the highest amount possible.
  3. At the time of the inspection, our in-house inspector will quote you a fair cash offer, and if you’re on board, you can consider your home sold!
  4. Choose your closing date, and leave the rest to us. You can choose payment via check or wire transfer. It simply doesn’t get any easier.

How Does Selling a House With a Mortgage Work? Final Points

Selling a house with a mortgage involves a careful balance between financial considerations and the intricacies of the real estate market.

Sure, it’s possible to sell a property with an outstanding mortgage, but it’s essential to comprehend the process thoroughly. 

So, if you’re in Southern California and considering selling your house with a mortgage or even selling a house for cash, reach out to us. We’ll guide you through the process hassle-free, offering a fair deal and a stress-free selling experience.

FAQs

Can You Sell a House With a Fixed Mortgage?

Yes, you can sell a house with a fixed-rate mortgage. When you sell a property with this type of mortgage, the process typically involves paying off the remaining balance owed on the mortgage at the time of the sale, just as with other types of mortgages.

Do You Still Pay Mortgage When Selling Your House?

Typically, yes, mortgage payments continue until the house sale concludes. Upon selling the property, the garnered proceeds are commonly employed to clear the outstanding mortgage balance entirely, ensuring a complete settlement of the loan as an integral aspect of the sale procedure and facilitating a seamless transition of ownership.

Do I Have to Pay Off My Mortgage When I Sell My House?

Yes, it’s a standard procedure to pay off your mortgage when you sell your house. The funds from the sale are generally utilized to pay off your current mortgage balance. Once the mortgage is settled and any associated costs are covered, any remaining funds become your profit.

  1. Give us a call at 951-331-3844—or fill out the short form below—to request your fair cash offer.
  2. Await our prompt response to discuss your property in greater detail and schedule a one-time inspection that allows us to offer the highest amount possible.
  3. At the time of the inspection, our in-house inspector will quote you a fair cash offer, and if you’re on board, you can consider your home sold!
  4. Choose your closing date, and leave the rest to us. You can choose payment via check or wire transfer. It simply doesn’t get any easier.

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