If you’re thinking of selling your house but still have a mortgage to pay, you may wonder what your options are. Selling a house with a mortgage is possible, but it can be a complicated process. In this blog post, we’ll walk you through everything you need to know about selling your house with a mortgage.
Understand what happens to your mortgage when you sell your home
When you sell your home, the buyer’s funds go towards paying off your remaining mortgage balance and closing costs first. Anything that’s left goes to you as profit. You’ll need to find out whether there is a prepayment penalty attached to your mortgage loan, which is a financial penalty for paying off your mortgage too soon.
Find out how much you still owe on your mortgage
Contact your lender to get your payoff amount, which includes accrued interest dated to the closing date. This is different from the number listed on your mortgage statements as your remaining loan balance. Ask your lender how long the payoff amount number is good for, usually somewhere between ten and thirty days.
Consider your equity
Equity is how much financial stake you have in your home. There are two different types of equity that combine to make up your whole home equity: home investment equity and earned equity. When someone buys your house, their funds cover transaction costs and pay your mortgage lender. Anything left over at that time is your profit, which can be used as a down payment for your next home.
What if you owe more than your house is worth?
If you don’t have enough equity in your property to pay off your mortgage, you have negative equity. You can make up the difference with your own cash, sell your home with a short sale, or undergo foreclosure. A short sale is something that your lender must agree to, and it’s a better option than foreclosure, which has more severe financial consequences.
Understand what happens to your mortgage when you’re buying a house at the same time you’re selling one
If you’re selling your home and buying a new one at the same time, you’ll need to make sure your finances are in order. You can use the profits from selling your current home as a down payment for your new one, but make sure to factor in closing costs and other expenses.
Selling a house with a mortgage can be a complicated process, but it’s possible with the right knowledge and planning. Contact Moe Buys Homes for more information and guidance on how to sell your house with a mortgage.