Can You Sell A House With A Mortgage?
Absolutely! You can sell a house with a mortgage. Ensure the sale price exceeds the outstanding mortgage balance. Equity is key to selling a mortgaged property. Pay off the loan using sale proceeds.
Selling a house with an existing mortgage
When selling a house that has an outstanding mortgage, you have a few options to handle the loan:
Port the mortgage:
- You may be able to transfer or “port” the existing mortgage to your new home, avoiding mortgage cancellation penalties. This maintains the same interest rate and terms.
- To qualify, you must buy the new home within 120 days and it must be of the same or higher value as the sold home. The lender will then re-assess your finances.
Pay off the mortgage:
- You can pay off the mortgage completely with the sale proceeds. This avoids monthly payments but may trigger early repayment charges.
- Make sure the sale price covers the outstanding mortgage balance plus any fees to discharge the mortgage.
Transfer to the buyer:
- The buyer may be able to take over or assume your mortgage as part of the purchase. This avoids repayment fees.
- The buyer must qualify with the lender and you remain responsible until the transfer is approved. There may be transfer admin fees.
Seek personalised expert advice:
The best option depends on your specific mortgage, property values, and personal financial circumstances. Consult with a qualified mortgage adviser to review your situation and provide tailored guidance on the optimal path forward when selling your mortgaged property.
Selling your house before paying off your mortgage
You can sell your property at any time, even if your mortgage term has not ended. However, there are a few key considerations:
Outstanding loan balance:
- If selling, ensure your property’s market value covers the remaining mortgage owed plus any early repayment charges. Being in “negative equity” limits options.
Early repayment fees:
- Most mortgages charge exit fees if paying off your loan early while still in the initial deal term period, which can be 5+ years. Fees can be thousands, so review your mortgage terms first.
Porting the mortgage:
- You may be able to transfer or “port” the mortgage to a new property purchase, avoiding repayment charges. This maintains the same loan terms and rate. Qualifying criteria applies.
Other costs:
- Even without early repayment fees, selling will incur legal fees, real estate agent commissions, and other transaction costs. Factor these in when valuing sale prices.
Explore alternatives:
- Consider letting your home instead of selling, subletting rooms, renting out the property, or taking in a lodger to cover the mortgage. This avoids repayment fees and costs.
Expert Tip: Before formally placing your property on the market, consider getting a professional appraisal done to accurately gauge its current market value. This will help you realistically price it for sale at a level that both covers your outstanding mortgage and attracts suitable buyers. An appraiser can also advise if local housing price trends may impact achieving your target sale price. Taking this prudent step upfront can help maximise your chances of a quick and successful sale.
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What happens to my mortgage when I sell my home?
When you sell a property that still has money owed on the mortgage, there are two main options:
Pay off the mortgage
- Use the sale proceeds to repay the mortgage loan balance plus any applicable discharge fees.
- This severs your financial obligation to the lender. However, early repayment penalties may apply if still in the initial mortgage term.
Port the mortgage
- Transfer the existing mortgage to your new property purchase via a “porting” process.
- This maintains the same loan interest rate, terms and conditions. Porting avoids early repayment fees.
- For the port to be approved, the new property’s value must be equal to or higher than the sold property. Surplus equity can require a second mortgage.
Which option is best?
It depends on your situation, including:
- Current mortgage interest rate vs new rates.
- Applicable early repayment penalties.
- New property equity and financing needs.
- Lender policies on porting criteria.
With access to all products and lenders, brokers can negotiate optimal terms for your new mortgage or ported loan.
Key considerations before selling a mortgaged house
If you are planning to sell a home that still has an outstanding mortgage loan, be sure to evaluate these critical factors beforehand:
Outstanding loan balance
- Confirm your sale price will clear your remaining mortgage debt including any early repayment charges. Shortfalls can prevent completion.
Ongoing payments
- You must maintain mortgage payments until the property sale is completed. Budget for this commitment along with other ownership costs.
Negative equity
- If your property value has dropped below your loan amount owed, selling is rarely advisable as it realizes a loss. Consider alternative options instead.
Impact on benefits
- Lump sum proceeds from a property sale may affect your eligibility for income-related welfare support, grants, tax credits, etc. Seek professional guidance first.
Future housing plans
- Carefully determine if discharging your mortgage now aligns with your long-term housing objectives before committing to selling your home.
How soon can you sell after getting a new mortgage?
Many mortgage lenders impose a minimum 6-month occupancy period before allowing you to sell a property and pay off or port your mortgage. This aims to deter quick resales solely for profit.
However, if your reasons for needing to sell urgently are reasonable – such as job relocation, family changes, health issues, etc – lenders can waive this rule. Communicate your unique situation openly.
Aside from mortgage lender policies, selling very soon after purchasing may also dampen buyer enthusiasm and price offers. It implicitly signals something is unsatisfactory about the property. Consider if rushing to sell is essential.
That said, needing to quickly sell and buy another property is understandable in certain circumstances. Your mortgage broker can negotiate with lenders to port your mortgage deal to streamline the process of selling within 6 months. A good broker leverages their wide industry access into flexibility.
So while the 6 month guideline exists, credible personal reasons can open constructive discussions with mortgage lenders on feasible options to sell promptly or port an existing mortgage to a replacement property purchase. Expert brokers handle conversations sensitively and firmly to deliver positive outcomes.
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Key steps when selling a mortgaged property
If selling your mortgaged home makes sense for your situation, be sure to take these steps before listing it on the market:
Check loan balance:
Calculate precisely how much is left to pay on your mortgage loan. Online valuations give a guide but confirm the exact outstanding figure with your lender to determine if a sale at market value can fully repay the amount owed.
Assess early repayment fees:
Review your mortgage terms and conditions to quantify any applicable early repayment charges you would incur. Factor this into the sale price needed to cover settling your mortgage in full.
Get expert valuation advice:
Work with a professional valuer to accurately assess your property’s current market worth and the optimal listing price to sell it quickly. This accounts for local area sales data to advise a competitive yet achievable price.
Explore porting your mortgage:
If buying another home soon, investigate porting your mortgage to the new purchase first. This transfers your current mortgage deal without repayment fees. Your broker negotiates this for you and secures any extra financing needed.
Taking careful steps prepares you to sell your mortgaged property smoothly, repay lending obligations, and progress planned next housing moves whether discharging your mortgage or porting it to a new one.
The bottom line
Selling a property that still has outstanding mortgage finance can seem daunting, with many fiscal considerations to evaluate. Yet by arming yourself with a clear understanding of the mortgage discharge process and repayment repercussions, the key steps you must take, and securing prudent guidance from qualified mortgage professionals, you can navigate a house sale while encumbered confidently.
Expert Mortgage Brokers will outline your options, demystify industry jargon and technicalities, negotiate optimal terms and conditions if porting or securing a new mortgage, and provide trusted counsel so you make fully informed decisions aligned to your financial situation. Our bespoke assistance makes the process smooth, successful, and financially sound. So don’t hesitate to consult specialists to discover what works best for you. We bring clarity and reassurance to each step of the mortgage release or transfer journey when selling your cherished home.
