On average, more than 5 million homes are sold each year.
Selling a house is a process, though. This process takes time and money, and many people still owe money on their homes when selling.
Are you wondering what happens when you’re selling a house with a mortgage? How does this work? If you owe money on your home when selling it, you might be curious about this fact.
Continue reading this guide to learn everything you need to know about selling a house when you still owe money to your mortgage lender.
Get Under Contract
When selling a home, you might begin by doing some research. For example, what are the current home selling trends you need to know? A real estate agent can answer this question and others for you.
As you research the current trends and local agents, you can hire an agent to sell your house. The goal is to find a buyer and reach a deal with them. Once this occurs, you’ll be under contract.
The contract states the deal’s terms, including the selling price and contingencies. It might also communicate information about the home mortgage the buyer will use to complete the purchase.
This contract guides the remaining steps in the home sale, and you can’t move on until you have this contract in hand.
Pay Off the Entire Loan Balance
After reaching a contract with the buyer, both parties must complete steps and duties before closing. Closing is when you transfer the ownership rights from your name to the buyer’s name.
It’s also the time when you pay off your mortgage. All types of mortgages allow you to pay them off early when selling your home. However, some require a prepayment penalty. If your loan has this, you’ll pay an extra fee.
A few days before closing, the title company handling the closing will request a mortgage payoff from your lender. A mortgage payoff tells the title company how much you owe on the house as of the closing date.
This balance is the amount you must pay when closing on the house sale. When you pay this amount, you satisfy the loan terms with your lender and no longer owe any money on your mortgage.
Your mortgage payoff amount might be different than your loan balance. A payoff includes the balance you owe plus the interest from the previous statement date to the closing date.
Settle on the Other Expenses
When closing on the house, your mortgage balance is the first thing the title company pays from the proceeds from your house sale. But, it’s not the only expense that cuts into your profit.
The title company performs a title search to look for liens. When completing this search, they will find your home loan, but they might also find other liens. You must pay every lien from the sale proceeds that they find.
Additionally, you’ll be responsible for other expenses. For example, you must pay a commission to the real estate agent you hired to sell your house.
You might have to pay part of the buyer’s closing costs, title fees, title insurance, and other expenses. A seller also pays for prorated property taxes, HOA fees, and insurance costs.
These expenses also come out of the sale proceeds. So, when you look at your home’s selling price, you should remember that you won’t receive the full selling price.
Instead, you’ll receive the selling price minus your mortgage loans, commissions, and other home-selling expenses.
Attend the Closing
The closing appointment requires paperwork. You will sign many documents as the seller, and the buyer will sign a lot of documents. You should receive a settlement statement beforehand, though.
This settlement statement shows all the financial details of the transaction, and it usually contains two separate columns. One column illustrates the seller’s financial details, and the other illustrates the buyer’s details.
On the seller’s column, you’ll notice all the money coming and going. The first line should state the selling price. The additional lines include the details of all the expenses you must pay before receiving a check for the profit.
The bottom line reveals the amount you’ll receive from the home sale.
The seller’s column lists all the expenses and credits they’ll receive through this sale. The bottom line for the seller is the amount they need to bring to the closing appointment to complete the deal.
Receive a Check if There Is Money Left
Unfortunately, some homeowners attend their closing appointments and don’t receive a check from the sale. Instead, they have to bring a check to this appointment.
In other words, they have to pay money to sell their homes. This probably doesn’t seem like a great deal to you.
If you’re worried that this might happen to you, it might be wise to look into some other home selling strategies. For example, have you read through the FAQs on selling your house for cash?
Selling a home for cash lets you bypass all the extra expenses. While you must pay off your loan balance when selling for cash, you won’t pay for anything else.
You can find out more by requesting a cash offer for your home. When you get the offer, you can compare it to your current mortgage balance to determine how much money you’ll walk away with if you sell it for cash.
As a result, you won’t have to wonder how much money you’ll earn or need when attending the closing for your property. Instead, you’ll know exactly how much you’ll receive.
Selling a House With a Mortgage Requires Some Work
Are you selling a house with a mortgage? If so, you must pay off your loan balance and other expenses before receiving your cut.
However, there is an easier way to handle this event. You can contact us at We Buy Homes. We simplify the process and eliminate most of your expenses.
Are you ready to learn more? If so, contact us today or visit our website for more information.
