Emily Southey<\/a> | 13 minute read<\/p>\n[\/et_pb_text][et_pb_post_title title=”off” author=”off” date_format=”M j” categories=”off” comments=”off” featured_image=”off” _builder_version=”4.18.0″ _module_preset=”default” global_colors_info=”{}”][\/et_pb_post_title][\/et_pb_column][\/et_pb_row][et_pb_row _builder_version=”4.18.0″ _module_preset=”default” width_tablet=”” width_phone=”100%” width_last_edited=”on|phone” max_width_tablet=”” max_width_phone=”100%” max_width_last_edited=”on|phone” custom_padding=”21px||||false|false” global_colors_info=”{}”][et_pb_column type=”4_4″ _builder_version=”4.18.0″ _module_preset=”default” global_colors_info=”{}”][et_pb_image src=”@ET-DC@eyJkeW5hbWljIjp0cnVlLCJjb250ZW50IjoicG9zdF9mZWF0dXJlZF9pbWFnZSIsInNldHRpbmdzIjp7fX0=@” align=”center” force_fullwidth=”on” _builder_version=”4.18.0″ _dynamic_attributes=”src” _module_preset=”default” custom_padding=”2px|||||” border_radii=”on|32px|32px|32px|32px” border_radii_tablet=”on|32px|32px|32px|32px” border_radii_phone=”on|0px|0px|0px|0px” border_radii_last_edited=”on|phone” global_colors_info=”{}”][\/et_pb_image][\/et_pb_column][\/et_pb_row][et_pb_row _builder_version=”4.18.0″ _module_preset=”default” min_height=”866.2px” custom_padding=”23px||14px|||” global_colors_info=”{}”][et_pb_column type=”4_4″ _builder_version=”4.18.0″ _module_preset=”default” global_colors_info=”{}”][et_pb_text _builder_version=”4.18.0″ _module_preset=”default” text_font_size=”21px” text_line_height=”1.6em” header_2_font=”||||||||” header_2_font_size=”36px” header_2_line_height=”1.3em” header_3_font_size=”1.25rem” header_3_line_height=”1.88rem” header_4_font=”|700|||||||” header_4_font_size=”1.25rem” header_4_line_height=”1.88rem” global_colors_info=”{}”]<\/p>\n
Looking to sell your house but still have a mortgage on it? Your options will range depending on the terms of your mortgage. While it\u2019s certainly possible to sell a home with a mortgage, the process can be a bit more complex. Continue reading to learn all about how selling a home with a mortgage works.\u00a0<\/span><\/p>\n–<\/span><\/p>\nCan You Sell a Home With a Mortgage?<\/strong><\/h2>\nFirst off, you may be wondering if selling a home with a mortgage is even possible. The good news is yes, you can sell your home even if you have yet to pay off your mortgage. In fact, selling a property that still has a mortgage on it is extremely common. (Keep in mind that mortgage terms last a long time, and many homeowners do not stay in their homes long enough to pay off the entire loan). The benefit of selling your home with a mortgage is that doing so allows you to use your equity to pay off the rest of the loan, along with your share of any closing costs associated with the home sale. That said, prepayment penalties may apply depending on the terms of your current mortgage (more on that below).\u00a0<\/span><\/p>\n–<\/span><\/h2>\nUltimately, if you still have a mortgage but are thinking of selling your home, we recommend contacting your mortgage lender as soon as possible. They can inform you of your current mortgage payoff amount (which is often valid for between 10 days and 30 days). Confirming your outstanding loan balance can help you determine the ideal selling price of your home, as you want to be able to use the profits from the home sale to pay off your mortgage loan. At this point, we also suggest reviewing the terms of your mortgage by reading through your mortgage loan paperwork. Specifically, keep your eyes peeled for a due-on-sale clause, which protects lenders by requiring homeowners to pay their mortgage loans in full after selling their properties (or transferring their house deeds to another party). Please note that not all mortgages have a due-on-sale clause, but many do, so it\u2019s important to check in advance.\u00a0<\/span><\/p>\n–<\/span><\/h2>\nFinally, although the loan contract with your lender may contain certain conditions about the sale of your home, your lender will not have a significant role in the home-selling process. They may request information about the buyer\u2019s mortgage lender but typically, they do not get a say in who you sell your home to. This means that as long as you abide by the terms and conditions of your existing mortgage loan agreement, you should have no trouble selling your home with a mortgage.\u00a0<\/span><\/p>\n–<\/span><\/strong><\/h2>\nMortgage Prepayment Penalties<\/strong><\/h2>\nDepending on how you decide to sell your home with a mortgage, you may be required to pay prepayment penalties to your mortgage lender. Prepayment penalties are typically charged to borrowers who break their mortgage contracts early. These fees can be expensive, especially if your mortgage term is still in its early stages. It\u2019s also important to note that not all prepayment penalties are the same. Rather, they vary from lender to lender, which is why it\u2019s so important to contact your lender before you start the process of selling your home to determine what these fees will amount to. We also recommend learning about early payout penalties before signing a mortgage contract in the first place. Most fixed-rate mortgages have prepayment penalties that add up to either three months\u2019 worth of interest or the interest rate differential (IRD). The latter is calculated based on the amount that is being prepaid, as well as the difference between your existing interest rate and the mortgage lender\u2019s current interest rate. Meanwhile, most variable-rate mortgage penalties are free from IRD penalties, amounting to three months\u2019 worth of mortgage interest in total.\u00a0<\/span><\/span><\/p>\n–<\/span><\/span><\/h2>\nThree Options for Selling a House With a Mortgage<\/strong><\/h2>\nSelling a home is certainly an exciting prospect, but if you still have a mortgage on your house then one of the first steps is to figure out what to do with it. Although paying off your mortgage through the home sale is the most common way of selling a house with a mortgage, it isn\u2019t the only option. Below, we break down the three most popular options when it comes to selling a home with a mortgage: paying off your mortgage, porting your mortgage, or having the buyer assume the mortgage.\u00a0<\/span><\/p>\n<\/ul>\n[\/et_pb_text][\/et_pb_column][\/et_pb_row][\/et_pb_section][et_pb_section fb_built=”1″ _builder_version=”4.18.0″ _module_preset=”default” background_color=”#edf7f3″ custom_padding=”32px||32px||true|false” global_colors_info=”{}” da_is_popup=”off” da_exit_intent=”off” da_has_close=”on” da_alt_close=”off” da_dark_close=”off” da_not_modal=”on” da_is_singular=”off” da_with_loader=”off” da_has_shadow=”on” da_disable_devices=”off|off|off”][et_pb_row _builder_version=”4.18.0″ _module_preset=”default” global_colors_info=”{}”][et_pb_column type=”4_4″ _builder_version=”4.18.0″ _module_preset=”default” global_colors_info=”{}”][et_pb_text _builder_version=”4.18.0″ _module_preset=”default” header_2_text_align=”center” header_2_text_color=”#38505b” header_2_font_size=”2.63rem” header_2_line_height=”3.75rem” max_width=”800px” module_alignment=”center” header_2_font_size_tablet=”32px” header_2_font_size_phone=”27px” header_2_font_size_last_edited=”on|phone” header_2_line_height_tablet=”3.75rem” header_2_line_height_phone=”32px” header_2_line_height_last_edited=”on|phone” global_colors_info=”{}”]<\/p>\n
“Depending on how you decide to sell your home with a mortgage, you may be required to pay prepayment penalties to your mortgage lender. “<\/strong><\/h2>\n[\/et_pb_text][\/et_pb_column][\/et_pb_row][\/et_pb_section][et_pb_section fb_built=”1″ _builder_version=”4.18.0″ _module_preset=”default” custom_padding=”||68px||false|false” global_colors_info=”{}” da_is_popup=”off” da_exit_intent=”off” da_has_close=”on” da_alt_close=”off” da_dark_close=”off” da_not_modal=”on” da_is_singular=”off” da_with_loader=”off” da_has_shadow=”on” da_disable_devices=”off|off|off”][et_pb_row _builder_version=”4.18.0″ _module_preset=”default” custom_padding=”46px||11px|||” global_colors_info=”{}”][et_pb_column type=”4_4″ _builder_version=”4.18.0″ _module_preset=”default” global_colors_info=”{}”][et_pb_text _builder_version=”4.18.0″ _module_preset=”default” text_font_size=”21px” text_line_height=”1.6em” header_2_font=”||||||||” header_2_font_size=”36px” header_2_line_height=”1.3em” header_3_font_size=”1.25rem” header_3_line_height=”1.88rem” header_4_font=”|700|||||||” header_4_font_size=”1.25rem” header_4_line_height=”1.88rem” global_colors_info=”{}”]<\/p>\n
Option 1: Pay Off Your Mortgage<\/strong><\/h3>\nThe first option is to pay off your mortgage outright. This can be a great option for homeowners with an open mortgage (for example, one that is free from prepayment penalties). Generally speaking, this option may not be available to everyone, especially if the outstanding balance is significant. But if the remaining balance is small or you don\u2019t plan on purchasing another property after selling your existing one, paying off your mortgage in its entirety might be the simplest, most convenient option.\u00a0<\/span><\/span><\/p>\n–<\/span><\/strong><\/span><\/h2>\nOption 2: Port Your Mortgage<\/strong><\/h3>\nThe second option is to port your mortgage. Porting a mortgage is the process of transferring it to another property that you are buying. If you choose this option, you can leave your mortgage as is (for example, the same interest rates and terms). Alternatively, if you need to increase or decrease the amount of the existing mortgage to reflect the costs of your new home, you can speak to your mortgage lender about refinancing. This is a great option if the home you are buying costs more than the one you\u2019re selling. That said, if interest rates at the time of your move are high, this option may not be the best. Most homeowners only port their mortgages if they have a great interest rate with their current mortgage lender or if they want to avoid hefty prepayment penalties. Porting a mortgage ultimately means that both parties agree to maintain their relationship but sign the mortgage over to a new property. If you decide not to port your mortgage, but your mortgage still has an outstanding balance on it, you will need to break your contract with your current lender and pay whatever penalties come along.\u00a0<\/span><\/p>\n–<\/span><\/strong><\/h2>\n<\/h2>\n
It\u2019s important to note that the property you\u2019re buying will still need to be approved and appraised. Not every borrower or every property will qualify for this option. For example, borrowers with variable-rate mortgages may not have the option to port. Porting will also be unavailable to anyone who does not meet the requirements for approval on a new mortgage. To qualify for porting your mortgage, you will need to reapply and meet the current lending criteria (that is, you will need to prove that you can afford to pay back your loan should interest rates rise). Unless the borrower can prove that they can handle the financial stress of a rate increase, they will not be approved.\u00a0<\/span><\/p>\n–<\/span><\/strong><\/h2>\nOption 3: Buyer Assumes Your Mortgage<\/strong><\/h3>\nThe third option when selling your home with a mortgage is to allow the buyer to assume the mortgage. This practice is less common but when interest rates are low, it can be a great option. In fact, when a seller has a low-interest mortgage, marketing the mortgage along with the property sale can be a selling point, making your home more attractive to potential buyers. Not only can assuming your mortgage be beneficial to a buyer, but it will also be beneficial to you, as it will allow you to get out of your current mortgage contract without breaking the contract (and having to pay the obligatory prepayment fees).\u00a0<\/span><\/p>\n–<\/span><\/strong><\/h2>\n<\/h2>\n
As you can see, sellers have several options when it comes to selling their homes with a mortgage. If you aren\u2019t sure which is right for you, speak with a mortgage lender or broker directly who can offer their professional opinion on which option will be most beneficial.\u00a0\u00a0<\/span><\/p>\n–<\/span><\/strong><\/h2>\nPreparing to Sell a Home With a Mortgage<\/strong><\/h2>\nReady to sell your home with a mortgage? Start preparing by obtaining a payoff quote, calculating your home equity, and deciding between your options.\u00a0<\/span><\/p>\n–<\/span><\/strong><\/span><\/h2>\nObtain a payoff quote from your mortgage lender\u00a0<\/strong><\/h3>\nIf you\u2019re thinking of discharging your mortgage, reach out to your mortgage lender for a discharge or payoff quote. This is the amount of money that must be paid in order to have no further loan obligations. Typical payoff quotes include several important pieces of information, such as the total outstanding balance on the loan, as well as a breakdown of any fees being charged. This quote will also list the date on which it expires (which is usually between 10 and 30 days from the date it\u2019s requested), as well as the interest that will be due between the date of the quote and the expiration date. Ultimately, a payoff quote will reveal the total amount of money you will need to pay to settle your mortgage loan, which as you can see, will be more than simply the outstanding balance of the loan. Keep in mind that if you still have mortgage insurance on the loan, you will need to pay that off as well. <\/span><\/p>\n[\/et_pb_text][\/et_pb_column][\/et_pb_row][\/et_pb_section][et_pb_section fb_built=”1″ _builder_version=”4.18.0″ _module_preset=”default” background_color=”#f0faf4″ min_height=”334.8px” custom_padding=”3px||0px|||” da_disable_devices=”off|off|off” global_module=”849″ saved_tabs=”all” locked=”off” global_colors_info=”{}” da_is_popup=”off” da_exit_intent=”off” da_has_close=”on” da_alt_close=”off” da_dark_close=”off” da_not_modal=”on” da_is_singular=”off” da_with_loader=”off” da_has_shadow=”on”][et_pb_row _builder_version=”4.20.2″ _module_preset=”default” height=”1px” custom_padding=”0px||0px||false|false” locked=”off” global_colors_info=”{}”][et_pb_column type=”4_4″ admin_label=”Column” _builder_version=”4.18.0″ _module_preset=”default” global_colors_info=”{}”][et_pb_button button_text=”post popup button” button_alignment=”right” module_id=”dipi_popup_id_295151″ _builder_version=”4.20.2″ _module_preset=”default” positioning=”absolute” horizontal_offset=”-10000000px” z_index=”-1000000″ global_colors_info=”{}”][\/et_pb_button][et_pb_code _builder_version=”4.24.2″ _module_preset=”default” global_colors_info=”{}”]