They say that buying a house is one of the most stressful experiences in life you’ll ever encounter, and while that may indeed be the case, there isn’t enough talk about the hardships associated with selling a house, especially one with a mortgage.
Despite the endless paperwork associated with selling a mortgaged property, we’ve lately seen a sharp increase in the amounts of homeowners selling their homes, despite them still being mortgaged.
Those looking to sell house with mortgage USA may wonder where they stand legally, and indeed, how easy selling a house with an outstanding loan actually is. Can you sell a house with a mortgage, and if so, just how easy is it? Well, the truth is that, despite there being several steps to sell a house with a mortgage, doing so is surprisingly easy, and very common.
Here is a quick overview for those looking to sell a house with a mortgage USA, and several key facts to understand.
Can You Sell a House with a Mortgage?
The simple answer is yes you can.
If you’re looking to sell a mortgaged property, you are perfectly within your rights to do so. In fact, doing so is extremely common.
Statistically, the average US homeowner stays in their home for 13 years. Typically they pay off their outstanding mortgage on the property by selling it. Providing you have enough equity to pay off the mortgage in full when the deal closes, there’s nothing stopping you from selling a house with an outstanding loan, I.E a mortgage.
Benefits of Selling a Mortgaged House
Despite being perfectly legal and common, some of us may be wondering whether it’s the right decision to selling a house with a mortgage.
Here are a few benefits associated with selling a house with a mortgage.
- You can use profit from selling a mortgaged house to put toward your next property.
- If you are downsizing, you can keep the profits once your previous mortgage has been paid off.
- If you’re upsizing, you can use profit from selling a mortgaged house to put toward a down payment.
What Happens to My Mortgage When I Sell My House?
In a typical home sale, unless the real estate market is going through a very bad patch, you should be able to sell your property for more than you owe on your mortgage.
By paying off your mortgage over the years, you will have accrued equity in your home. This can then be cashed in on once you sell up.
When a house sale closes, between the mortgage loan and the down payment, the buyer will provide the funds at the settlement that are equal to the sale price of your home. You can then use these funds to pay off any equity loans, closing costs such as agent fees ETC, and of course, the outstanding mortgage balance.
Can I Sell my House If I Owe More Than It’s Worth? (Underwater Mortgage)
Selling underwater mortgage house issues are also fairly common in the real estate world. Put simply, an underwater mortgage is when the mortgage is worth more than the property is worth, meaning you have negative equity.
If for example, you paid over the odds for the property, or simply bought before the property market tanked, you could find yourself with what is known as an underwater mortgage. Can you still sell, but it’s important to know your options.
First off, you could pay off any outstanding payments yourself, from your own savings or investments. This is obviously far from ideal, but it will help protect your credit rating. Another option would simply be to put the house sale on hold and wait for real estate prices to increase.
The third option is a short sale. This means that your mortgage lender must provide permission for the house to be sold for less you owe on your mortgage. The lender has the final say over which offer to accept or reject. This will, however, negatively impact your credit score.
How Much Equity Do I Need to Sell My House?
In truth, there is no clearcut answer to this question because it depends on a number of factors and circumstances.
A general rule of thumb, however, is that you should aim for around 15% if you wish to upsize, or 10% if you’re simply looking to relocate and purchase a similar-sized property.
What Are the Closing Costs for Selling a House with a Mortgage?
As far as closing costs when selling with a mortgage, again, there is no clear and concise answer to what they will be because each sale will be different. As a general guide, expect closing costs of between 2% and 6% of the total mortgage loan amount.
How Long Does It Take to Sell a House with a Mortgage?
How long is a piece of string? The simple fact of the matter is that we can’t give you a precise answer to this question because there isn’t one. You could list a mortgaged house for sale and find that it sells in less than 7 days, or it could take months, or even remain on the market for years.
Statistically however, as of March 2023, it took on average 54 days to find a buyer. Does this mean that your house will sell in that duration of time? Absolutely not. It could sell much quicker, or it could take much longer. It should be noted that, as soon as the Fed begins implementing the projected three interest rate cuts later in 2024, property sales should start speeding up.
