A Guide to Selling a House with a Mortgage

Maybe it’s a new job in a new city. Maybe your family has grown beyond what your house can really hold. Maybe a new locale seems nice. Whatever the reason, it’s time to pack the boxes, sell the house, and move.But what do you do if you still have a mortgage on your home? You’re ready to sell, but you’re not sure where to start since you still owe money on your current home. 

This scenario is very common. Most homeowners move after 14 years – well before the average 30-year mortgage is paid off. In fact, 63% of homeowners are still paying off their mortgage. So, if you’re in this situation, what happens next? What can you do? 

While it might feel like having a mortgage is a big obstacle, we’ll give you a complete guide to selling a house with a mortgage to help you get started with your big move. 

Can You Sell a House with a Mortgage?

So can you sell your house if you have a mortgage? The short answer is, “yes, absolutely!” You need to do a few things to make it happen, but it’s possible if you have the right equity in place. It’s fairly common for people to sell their houses before they have completely paid off their mortgage. 

So how does it work? Essentially, you are still required to pay off the mortgage in full when you sell the house, but you pay it off by selling the house for something that covers the remaining mortgage balance. You get the cash from selling to pay off your mortgage and closing costs, and then you keep the rest. The key here is home equity. 

Home equity is the difference between the value of your home and how much you owe on it. For example,if your house is worth $300,000 and you owe $100,000, your home equity is $200,000.

We’ll talk about the steps to go about selling your home with a mortgage, but you might have a more pressing question first. 

What if I Don’t Have Enough Equity to Pay Off the Mortgage?

What if you don’t have enough equity to pay off the mortgage? Let’s say you have a house worth $500,000, and you still owe $400,000. You only have an equity of $100,000, and to sell your house, you’d need to provide that $400,000 at the sale. That’s where the problem arises. This scenario is called negative equity. What are your options? You have two choices: bring the money in yourself or try to sell on short sale. A short sale will damage your credit because the bank won’t be repaid in full. 

How to Sell a Home with a Mortgage

If you have enough equity to make your home sale happen, what do you do? These are the steps to take when you sell your home with an outstanding mortgage. 

Get a payoff statement

Before you begin, you need to know  your remaining mortgage balance. Contact your lender for a payoff statement that will let you know how much you owe, how to pay your loan in full, and any details about pesky fees incurred for paying off your mortgage too early.

Determine the right time to sell

Be aware of the market you’re entering when you sell. If more people are buying than selling, you can set a higher listing price.But if lots of homes are on the market, you might find it harder to get an offer that works with your mortgage. 

Estimate the home value and list the property

There are many ways to estimate the home value, but one way is to check comparable homes in your area and get an idea of what they’re selling for. That will give you insight into how much you can list your home for. A real estate agent or realtor can give you valuable information into how much your home might be worth as well. 

Listing your property is important. You want to put up a fair asking price for your home that will bring in enough buyers to avoid fallout and to get multiple bids. The listing price should ideally be enough to cover the rest of your mortgage as well, so you can move easily. BidMyListing is a great way to get started with listing your property, and it helps you with the next step. 

Find the right real estate agent for you

Need a realtor? We have got you covered. With BidMyListing, you can list your property in order to find the best agent for you in a few simple steps. Start by accessing the homeowner portal where BidMyListing’s smart technology will automatically create your listing with the input of a few essential details. Then let agents bid to be the one to sell your home. Compare your bids, rates, commission and more to ensure you’re getting what you want. Pick the perfect match, and you’ve got a top of the line real estate agent without so much as leaving your home. Let the agents come to you! A good agent can help you set a listing price, guide you through the selling process, and help you understand the market you’re working in. 

Sell and cover closing costs

Once you have an offer you like, it’s time to actually sell your house. You’ll need to arrange the sale and cover the selling costs for the seller: 

• Owner’s title policy. This is often paid for by the seller as a show of good faith, so you may be responsible for this payment.

• Escrow account. The account holds money to protect both the buyer and seller until closing, and usually you’ll both split the costs. 

• Prorated taxes. You’ll pay real estate taxes for the portion of the month in which you live in the home prior to your sale.

You’ll also be responsible for the agent’s commission, which is often around 6% of the final sale price. 

Make the sale and pay off the remaining mortgage

Then you just sell the house! You made it! Once you get the house sold, you can use the sale money to pay off the remaining mortgage, and you’re on your way to moving. 

The Bottom Line

Overall, selling a home with a mortgage is pretty common. The key to doing it well is ensuring your equity is in line and finding the right agent to guide you through the process. Here at BidMyListing, we’re here to help you sell your listing to  find the right agent. Get started today! 

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