The Ultimate Guide to Selling a House With a Mortgage

Are you looking for ways to quickly build your wealth? One of the best methods is through real estate. And in today’s hot real estate market, you might be thinking about selling for a nice profit.

But if you have a mortgage on your house, you might not be sure how to go about selling your home. Thankfully, this is a very common situation that homeowners find themselves in.

So keep on reading and we’ll walk you through our ultimate guide to selling a house with a mortgage!

How To Prepare to Sell for Selling a House With a Mortgage

If you’re tired of dealing with monthly mortgage payments and want to sell your home, then it’s important that you’re prepared.

You’ll first want to get a payoff quote. This represents the amount of money that needs to be paid so that you’re no longer obligated to pay off the home loan.

You’ll have to talk to your lender to get this quote.

This quote will tell you how much you owe and what fees are being charged. You’ll also see what date the quote expires. You’ll also be able to see the interest that’s due up until the payoff date’s expiration.

Due to things like fees, your payoff quote will not match your mortgage balance. That’s why you can’t just pay your mortgage balance off and assume that you have no more obligations.

Determine Your Home Equity

Home equity refers to the difference between the value of your home according to the market and the outstanding balance on your mortgage that you need to pay. You can use your home equity to pay off outstanding balances in the sale as well as the closing costs.

You can increase equity through earned equity and home investment equity. Earned equity is gained by making your mortgage payment each month. Every time you pay, you own a little bit more of the home.

With home investment equity, your equity will go up and down depending on the value of your home.

Steps to Selling a Home With a Mortgage

For people looking for home selling tips, it’s useful to know that the proceeds of a home sale are used to pay off the mortgage and other obligations. They also pay for the closing costs associated with the sale.

Of course, the home needs to be sold for more than what is left to pay. Otherwise, you’ll be in negative equity.

1. The Sale Price Pays Off the Mortgage

If your home has a mortgage then it is known as a first lien. This means that when the home is sold, the first thing that gets paid off is the mortgage. The funds for the mortgage payoff will go straight to the lender.

2. Additional Liens and Loans Are Paid Off

After your mortgage is paid off, other liens and loans will be paid off with the sale proceeds. These include other lending products like home equity lines of credit (HELOCs) and home equity loans (also known as second mortgages).

Tax liens are also paid off in this sale.

3. Cover Transaction and Closing Costs

Once you pay off all of your liens, you’ll have to pay for closing costs and transaction fees. These are things like deed recording fees, which the seller might have to pay for.

Sellers will usually need to pay for the real estate agent’s commission.

You also might need to pay for the owner’s title policy. This protects the buyer in case someone comes along in the future with a claim to the property.

Of course, everything in real estate is negotiable. Sometimes, the seller will need to pay for more or fewer costs.

If you need to sell your home fast, you can read more about how to sell it for cash quickly.

4. You Keep the Rest of the Funds

After you pay everything off, you get to keep the rest of the money. If you plan to buy a new house then you can put that money into a down payment. You can also invest that money or do whatever you want with it.

How to Sell a House With Negative Equity

When you have negative equity, you owe more money on your house than it’s worth in the market. Some people will refer to this as an underwater mortgage.

If you find yourself in this situation and you need to sell your house, you might need to take part in a short sale.

A short sale is when you sell your house for less than you owe on the mortgage. A lender needs to approve this sale since you won’t be making whole on the mortgage.

The lender might only approve if you are likely to default on the loan, otherwise.

Short sales are usually measures of last resort. Your credit will end up damaged. However, you’re in control of the sale, as opposed to a foreclosure. Short sales can make it harder for you to get a mortgage in the future.

Selling a House With a Mortgage Is Possible

As we can see, selling a house with a mortgage is doable and simple. Of course, you want to make sure that your home isn’t underwater when you do want to sell your house. And you need to remember that your payoff amount is different from your mortgage.

But if you follow our guide, you should have an easy time paying off that mortgage and saying adieu to your old home.

Don’t forget to check out the rest of our site for more helpful real estate articles!