The most common home loan is a 30-year fixed-rate mortgage, but the average homeowner only stays in their house for roughly eight years. So what happens when homeowners still have an outstanding mortgage balance and want to move?
Selling a house with a mortgage is a common practice in real estate. The lender is paid off at closing either from proceeds from the home sale (if the house sells for more than is owed on it), from the seller’s pocket (if the house sells for less than is owed), or a combination of both.
Yes. As long as you’re in good standing with your lender, selling a house with a mortgage is standard practice. A high-level overview of the process looks something like this:
Yes. If you relinquished some of your home equity to a lender in exchange for a loan (a reverse mortgage), you can still sell your house. However, you will need to pay the entire loan balance when your home sells, just like with a traditional mortgage.
Of course, there’s more nuance to selling a house with a mortgage that you haven’t paid off yet. The steps below breakdown the process in detail:
Your loan balance will give you an estimate of how much of the proceeds from your home sale will need to go towards paying off your mortgage and how much could end up in your pocket. This can help you set your listing price. If possible, you’ll want an asking price high enough to cover the balance.
You can determine your balance by contacting your lender and requesting the payoff amount for the loan — this number is how much you will have to pay to satisfy the terms of your mortgage. It’s different from your current balance as it includes the interest you are also responsible for paying, as well as any early payment penalties.
Use Orchard’s Home Sale Calculator to find out how much you could make from the sale of your home.
Selling a home has a lot of steps. It can be helpful to map out your move to make things simpler and avoid seller’s remorse. Here’s what to consider:
Once you’ve set your timeline, kick it off by getting your house ready for sale. This process can take as much as three months to complete. Follow these basic tips to get the process started:
If all of your furniture is moved out by the time your home is on the market, consider staging the home to help buyers envision what life in your home might look like.
Work with an experienced local real estate agent to market your home and come up with a strategy for reviewing offers. Once the right offer comes in, accept and prepare to close.
When you sign the purchase contract, your closing manager will open an escrow account, which is essentially a holding tank for the documents and money you’ll exchange in a house sale. It can take almost two months to close on your home sale, so be patient in this final chapter of your journey.
Once the deal is in escrow, you’ll receive a settlement or closing statement. This document breaks down your home sale transaction into an itemized list of fees and credits. Here you’ll see the seller’s closing costs, which include:
Review the list with your agent to ensure everything is in working order. Once you confirm, prepare for closing day.
On your closing date, the buyer will send their payment to the escrow account. Your title company will make the final mortgage payment directly to your lender. Now, there are no liens on the home and ownership can be transferred over to your buyer.
Any remaining funds will be disbursed to your account — congratulations on your home sale!
If you’re buying and selling a house with a mortgage at once, things can get tricky. In a perfect world, you would sell your old home and buy your new one on the same closing date. Your real estate agent can try to negotiate this scenario for you, but more often than not, one part of the transaction needs to happen before the other. Here’s how this might play out:
Here are some of the most common questions that come up for homeowners who are selling a house with a mortgage:
Answer: In most cases, you may sell your home whenever you’d like. However, if you’re selling a house with a mortgage, you’ll need to wait until you have enough equity to profit or break even on the sale.
The money you make from the sale would ideally cover your mortgage balance, closing costs, and in rare cases, prepayment penalties (some lenders charge this fee if you end your mortgage early). If you sell your home less than two years later and make a profit, you may also have to pay capital gains tax, so make sure to factor that in as well.
Answer: You don’t need to tell your lender about your home sale until you’ve accepted an offer. However, it may be helpful to let them know earlier so they can give you an accurate mortgage payoff quote. This number will help you and your agent figure out how much the sale price needs to be so that you can cover the mortgage payment.
Beyond this, your lender’s involvement in the process is pretty limited. They may need some information about your buyer and their lender, but as long as your buyer is financially qualified, there should be no issues.
Answer: You could make an offer on a new home that is contingent on selling your old home. However, this can make your offer less competitive since sellers prefer bids that won’t fall through, even if it means accepting a lower offer.
Or, you can work with a service like Orchard. We’ll help you Move First by guaranteeing the sale of your current home and allowing you to unlock the equity to put towards your new one. Once you’ve moved into your new home, we’ll handle selling the old one. This can save you over $5,000 in moving expenses alone. Get started with a free home valuation.
When you list with Orchard, we’ll get your home show-ready and make repairs to increase your home’s value at no upfront cost.
Orchard guarantees your home will sell, so you can buy your next one worry-free.
We provide peace of mind that your home will sell, plus list your home on the market to maximize your earnings.
Use our home sale calculator to estimate your net proceeds.
Our Home Advisors are experienced local agents who know how to sell for top dollar and help win your dream home.
All Orchard Home Advisors are experienced agents who know your local market inside and out. Request a consult today.
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