How to Sell a House That Still Has a Mortgage

Most people won’t live in the same home for 30 years, the typical life of a mortgage loan. So, when it comes time to sell, many homeowners still have mortgage debt to deal with. Is this a problem? What happens to your mortgage when you sell your home?

Once you sign your name on a mortgage loan, you are responsible for the money—no one else. This means that you must pay it back, which you can do with the money you gain from selling your home.

The truth of the matter is that selling a house with a mortgage is a common occurrence.  Consult with your mortgage lender and your real estate agent to find out how you can sell a home with a mortgage. Here are a few tips that they might share with you.

Check Your Mortgage
The first step to selling a house with a mortgage is to contact your mortgage lender and ask about your current mortgage. You want to know:

Your current mortgage payoff amount
Your due-on-sale clauses
Your mortgage payoff amount is the exact amount of money, including accrued interest that you owe to the bank. This amount is typically good for 10-30 days and represents the outstanding loan balance that you must pay. The last thing you want to do is default on your mortgage.

The due-on-sale clauses reveal the exact rules of how to sell a house you still owe money on. It covers such information as when the paid-in-full loan is due and what the process is, including any fees. The clauses won’t tell you who you can or can’t sell your home to, but they may need some additional information about the buyer’s mortgage lender. Be sure to ask any questions you might have about these clauses, so you have a full understanding before you take the plunge and start your sale.

Selling Your Home
Once you know the ins and outs of your loan terms, it’s time to get to selling a house with a mortgage, which can get slightly complicated. First, you’ll want to work with a title company.

If your current lender doesn’t set you up with a title company, you can hire an agent on your own. This agent will be responsible for ensuring that there are no issues with your property’s title, and act as the intermediary throughout the entire purchase and sale process.

Here’s what happens to your mortgage when you sell your home and use a title company:

The title agent holds the money from the new buyer during the sale
After you sign all the documents at the closing table, the title agent uses the sale money to pay your current mortgage holder
Once the amount has been paid, the title transfers to the buyer and you, as the seller, are given the leftover money (minus various fees)
If the sale covers the full cost of the current loan, it’s a fairly smooth process. However, if you owe more than your home is actually worth—negative equity—there could be some trouble. In that case, you’ll have to work out a deal with your lender for a reduced payoff amount, or you may need to refinance and stay in your home for longer than you planned.

In the end, selling a home with a mortgage shouldn’t be a problem. The most important thing is to know your options, so that you can make the right decisions.