Selling House with Mortgage
Selling a house with a mortgage is common and entirely possible. If you still owe money on your home loan, the sale proceeds will first go toward paying off the remaining balance. Any leftover profit will go to you.
However, there are steps to follow, like getting a loan payout figure, coordinating with your lender, and managing the settlement process.
Can You Sell House with Mortgage?
Yes, you can sell a house even if it’s mortgaged. Once the sale is finalised, the lender is paid directly from the sale proceeds to close the loan.
Any remaining funds after that are yours. Keeping your lender informed throughout the process is essential.
Key Tip: Selling a mortgaged home is straightforward as long as you stay organised and communicate with your lender.
Steps to Selling a House with a Mortgage
- Request a Payout Figure: Contact your lender for a payout figure, which includes the remaining loan balance and any fees (like penalties for fixed-rate loans).
- List the Property and Engage an Agent: Work with a real estate agent to set the right price—one that covers your loan and fits the market.
- Discharge the Mortgage: Submit a discharge form to your lender. This allows the mortgage to be removed at settlement. Processing can take several weeks, so plan ahead.
- Coordinate with Your Conveyancer or Solicitor: Your conveyancer will coordinate with your lender to ensure the loan is repaid and the property title is transferred to the buyer.
- Settlement Day and Loan Closure: On settlement day, the buyer’s funds will pay off your loan. After the mortgage is cleared, the property title transfers to the buyer, and any leftover money goes to you.
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Things to Consider Before Selling
- Break Fees on Fixed Loans: If you have a fixed-rate loan, there may be penalties for paying it off early. Check with your lender to understand these costs.
- Bridging Loans for a New Property: If you’re buying a new home before selling the current one, a bridging loan can help cover the gap.
- Negative Equity Risks: If your house is worth less than your remaining loan, you’ll need your lender’s approval to sell and may need to pay the difference.
What Happens to the Mortgage When you Sell?
When you sell your house:
- The sale proceeds are used to pay off the loan directly.
- If the sale price is higher than the loan balance, the remaining amount goes to you.
- If the sale price doesn’t cover the loan, you’ll need to make up the difference.
Key Tip: Selling your home automatically closes the loan. Ensure your sale price covers the mortgage or have a backup plan.
Planning Makes All the Difference
Selling a house with a mortgage can be hassle-free with proper planning. Start by getting your payout figure, work closely with your real estate agent and lender, and let your conveyancer handle the settlement. With these steps, the process can go smoothly and efficiently.
