You bought your dream house. Then, your dreams changed. Whether you need to relocate (for a job, for family, for financial reasons) or you want to move (to a larger home, to a different neighborhood) there is a good chance that you’ll need to investigate how to sell a home with a mortgage before you can make your move.
How to Sell a Home with a Mortgage
A home is a major purchase, and few people can afford to buy one outright. That’s where a mortgage comes into play. As Investopedia explains, a mortgage is a type of debt instrument that allows you to raise the funds needed to purchase a property in return for your promise to repay your lender via a set of predetermined payments in accordance with the terms of your contract. The property in question is used as collateral to secure the loan, and repayment involves paying the lender both the loan and interest. Mortgages routinely span 15 to 30 years, so it’s not uncommon for people to find themselves selling a home before their mortgage has been paid off. While it might be slightly more complicated to sell a home while it still has a mortgage, it is certainly possible.
Determining Your Payoff Amount
Generally speaking, you cannot sell something that isn’t yours, so the key to selling a house with a mortgage is to pay off the mortgage when you close on the sale of the property. To do this, you’ll need to learn what your payoff amount is. As the Consumer Financial Protection Bureau states, your payoff amount is the total price that you’ll have to pay to satisfy the terms of your existing home loan and completely pay off your debt. It’s worth noting that your payoff amount and your current balance are not the same thing. The payoff amount will include the current balance, any interest that accumulates between now and the date that you say that you’ll pay off the loan, and various fees. In some cases, you may also be responsible for a prepayment penalty.
Making the Sale
Once you’ve determined how much you need to pay off your mortgage, it’s time to focus on selling your house, which will likely involve enlisting the services of a real estate agent. Time reports that nearly 90 percent of sellers seek professional assistance when selling their home. Why are real estate agents so popular with sellers? As experts in the markets they serve, real estate agents are able to help sellers choose an appropriate price and work diligently to market the property to prospective buyers. They can also guide people through the complexities of the sale process, a fact that sellers with concerns about how to sell a home with a mortgage will likely find appealing because it reduces the odds of making potentially costly missteps.
When the Price Is Right
Many factors affect the value of your home. According to U.S. News & World Report, these include its location, age, condition, size, and layout. When setting the asking price for your home, you and your real estate agent will need to consider all of these factors. If you’re fortunate, then your house will sell for an amount that more than covers your remaining mortgage responsibilities. In this situation, the funds received from the buyer will be used to pay your debt to your lender and any fees that you’ve incurred during the sale. Any money that remains after these payments are made is yours.
When the Price Is Wrong
Unfortunately, not every seller makes enough on the sale of their home to pay off their existing mortgage. Many homeowners are underwater, which means that they owe more to their lender than the current market value of their home. This is a tough situation, but sellers who find themselves in it do have a few options. For starters, you can come up with the cash to cover the difference between the amount you receive for selling your home and your mortgage’s payoff amount. What if you lack the resources for this strategy? As the Nest points out, a short sale may be possible. Here, your lender agrees to accept a reduced payoff to help you sell the property. Not everyone qualifies for a short sale, so if you hope to go this route, it’s important that you speak with your lender to see if this is a possibility for you.
What Happens at Closing?
During closing, you’ll meet with the buyer to complete the paperwork required to transfer the ownership of the property. While the amount of paperwork can be overwhelming, be sure to review it carefully for accuracy before signing. How is your mortgage paid off during closing? According to the Nest, a title agent will accept they buyer’s payment, pay off your lender so that the lien can be removed from the title, and transfer the title to the new owner. Once your outstanding debts are paid, any remaining monies will be transferred to you. You might receive the funds at closing or a few days after the meeting.
Do you still have questions about how to sell a home with a mortgage? To discover more about the process and get a clearer picture of what you can expect, schedule a consultation with a real estate professional or contact your lender.
If you’re interested in buying a home and you live in the Kansas City area, contact PrimeLending today. Our team is committed to helping you navigate the home financing process, so that you can purchase the home of your dreams. At our branches located throughout Kansas City, we can help you explore our wide variety of loan products and programs. Plus, PrimeLending utilizes delegated underwriting, local appraisers, and cutting-edge technology to accelerate the underwriting and closing processes. We can also help you better understand how to sell a home with a mortgage. When you’re ready to learn more, please give us a call at 844-701-5626.