Selling a house with a mortgage is entirely possible, but it’s more complex than selling a completely paid-off home. This guide outlines everything you need to know about selling a house with a mortgage, including the steps to take and the potential challenges you may encounter.
Step 1: Determine Your Home’s Value
The value of your home may have changed since you purchased it. You’ll need to conduct a comparative market analysis (CMA) to determine its worth. A CMA compares your home to similar properties in the area that have sold recently.
By looking at these properties’ sale prices, you can deduce your home’s approximate worth. Compare this to your remaining loan balance so you understand how much you’re likely to pocket after paying off the mortgage.
Step 2: Hire a Real Estate Agent
A real estate agent assists with the home-selling process by helping you determine the right time to sell, set a fair price, market your home, and negotiate with potential buyers. Your agent can also help you navigate the legal and financial aspects of selling a house with a mortgage.
Step 3: Prepare Your Home for Sale
Before listing your home, you may want to make repairs, declutter, and deep-clean the space. The goal is to make your home as attractive as possible to potential buyers. Strive to keep your home clean and tidy throughout the selling process so it’s ready to show at a moment’s notice.
Once your home is ready, it’s time to list it on the market. Your real estate agent helps with this, including taking professional photos and writing compelling descriptions.
Step 4: Negotiate with Potential Buyers
Once you’ve listed your home for sale, potential buyers will start making offers. Your real estate agent will help you negotiate and find the best deal. This may involve making counteroffers, negotiating repairs, and helming other discussions.
If you have a mortgage, you want the sale price to be high enough to cover the outstanding balance. Ensure your real estate agent knows this when setting the list price and negotiating with buyers.
Step 5: Close the Sale
When you receive a good offer from a serious buyer, the next step is to close the sale. This involves finalizing the price, signing legal documents, and transferring ownership.
If you have a mortgage, your lender must release the lien on your property before the sale is finalized. This can take some time, so communicating with your lender is important to ensure a timely closing.
In addition to your lender, you’ll need to work with a title company to wrap up the closing process. This company conducts a title search to check for other liens besides your mortgage. With all the paperwork in order, you’ll sign the final documents and transfer ownership to the buyer.
Step 6: Pay Off the Remaining Mortgage
The final step is to pay off the remaining balance on your mortgage, releasing yourself from any further financial obligations related to the property. First, request a payoff statement from your lender outlining the remaining balance, including any interest and fees that have accrued since your last payment.
Next, transfer the necessary funds to your lender via a wire transfer, cashier’s check, or other approved payment method. Note that you must satisfy any outstanding liens or judgments against your property before you can pay off your mortgage in full. Work with your title company or an attorney to resolve any issues before transferring the final payment to your lender.
Paying off your mortgage is a significant financial milestone that provides a sense of relief and freedom. By promptly completing this step after closing, you can move on to your next housing situation with confidence and peace of mind. Remember, if the sale price exceeds your mortgage balance, you can pocket the rest or put it toward a down payment.
Challenges of Selling a House with a Mortgage
It’s extremely common to sell a home with a mortgage, but you should be aware that several potential challenges may arise. Here’s what to know before you start the process.
Selling a Home with Negative Equity
If you owe more on your mortgage than your home is worth, this means you’re underwater on your loan. Here are your options:
- Stay in the home until its value rises and your loan balance decreases to build some equity.
- Negotiate with your lender to release the lien on your property when you sell. Be prepared to pay the outstanding balance out of pocket.
- Consider a short sale if you’re struggling to make payments and need to move on. This is when the lender agrees to accept less than you owe on the mortgage. A short sale hurts your credit, but it’s less painful than a foreclosure.
Working with your mortgage lender at closing can be time-consuming and may cause delays. The process of having the lien released on your property can take several weeks or even months, so plan for this when considering your moving timeline.
Some lenders charge prepayment penalties for paying off a mortgage early, whether through a sale or a refinance. These penalties often equal several months of interest payments. To avoid surprises or financial setbacks, check with your lender to learn whether you owe prepayment penalties if you sell your home. Factor this cost into your decision to sell and consider negotiating with the buyer to cover the penalty.
Apply for a Home Loan in Oklahoma
If you’re selling a home with a mortgage, you may plan to take out another loan when you buy your next property. If so, turn to Financial Concepts Mortgage for flexible, affordable loan options. Unlike many national mortgage companies, we aren’t a mortgage broker; we’re a locally owned mortgage bank. This means we provide in-house loan origination, processing, underwriting, and closing to keep your information private and secure. When you’re ready, feel free to apply online or call us at (405) 722-5626 to speak directly with an experienced loan officer.