Some homeowners often wonder how this works, how can you possibly sell your home while there is still a mortgage on it. It can be fairly simple, just like selling a car that you haven't paid off yet. However, there are some things you need to take into account before deciding to sell.
First, you need to factor in the 5 year rule. If you bought your house within the last few years you may not be able to sell your home without bringing money to the closing table. New homeowners need to stay in their house for at least 5 years to make sure they don't lose money when it comes time to sell. We know this isn't always possible, especially when you have to transfer to another city because of your occupation. If your job is the case be sure and ask your employer if they can possibly help offset the costs of selling your home without any equity in it. Maybe they will, maybe they won't - it doesn't hurt to ask.
Steps To Take To Sell Your Mortgaged House
If you have been in the property for a few years and have to move the next thing to do is lose your emotional attachment to the property. We understand this can be difficult, especially if you like your house and are having to move because of work or some other reason. Investopedia has some good advice about this:
We can't stress enough how important it is to distance yourself from the property. If you can, pack up a lot of your personal belongings, especially pictures to make it easier for a buyer to see the home as their own.
Contact Your Mortgage Company
If you plan on listing your home with an agent you should contact your mortgage company first to learn what your pay off amount will be. This will help you when it comes time to calculate what the house will bring on the market. It will also help the agent to know at what price point you need to be if you have been in the home for a short amount of time.
Lauren Perez gives some more important info from her article on Smart Asset:
The due-on-sale clause is almost always in the loan paperwork now days. The lenders started putting that clause in to help them make more money. Basically it's there so that if interest rates were to rise sharply they can collect more in interest from a new home owner.
What If You Are "Upside Down" In Your Mortgage?
This isn't as common as it was a few years ago, but it does happen. As we discussed earlier if you have only been in the house a couple of years you won't necessarily be upside down, you just won't have enough equity to cover closing costs. However, some homeowners have multiple mortgages or HELOC's (Home Equity Line Of Credit) that is maxed out. These sales can be a bit more difficult, especially if you don't have the cash to cover these loans. So what do you do? A short sale.
SFGate explains perfectly what a short sale is:
It's great that the law was passed in 2011. However we have seen that short sales can take a long time, if they happen at all. For what ever reason the lender decides not to complete the short sale. If this is the case, unfortunately you may have to consider a Chapter 7 or 13 bankruptcy.
Summing It Up
Yes you can sell a house while there is still a mortgage on it. If you have been in the house for a long time - great, you shouldn't have any problems. If you sell the traditional way with an agent you should have enough money for closing and might possibly walk away with some cash. If you have been in the home only a few years, or owe more than it is worth, it might be a little more difficult.
If you have a house and would like to sell it, we would love the opportunity to make you an offer. If you have only been in the house a few years, we probably won't be able to make a deal. However, if you have been in it some time or the house needs some repairs - we probably can. Just reach out to us at (770) 756-8680 or visit our site to complete a brief form and we will get back to you soon.
The preceding post Can You Sell Your Home Before The Mortgage Is Paid Off? was first seen on Mandich Property Group. Learn more at: Mandich Property Group Sell Your House Fast For Cash Blog
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