There will come a time where selling your home is the most practical option. This is true for those who need to relocate due to work, wish to explore a new region of the country, or simply don't want to live in the house anymore.
But, the situation can seem confusing when selling a house with a mortgage.
Let's explore what you need to know.
So, What Happens When You Sell a Home With a Mortgage?
When you sell your home, you use the money that you made from the transaction to pay off the remainder of your mortgage balance. So, let's assume that you owe $500,000 in your current home and managed to find a buyer who is willing to pay $550,000.
You would use $500,000 of that money to pay off your loan and keep the other $50,000 for yourself (minus fees, associated costs, etc.).
For the vast majority of home transactions, this is the scenario that plays out.
What If I Can't Pay off My Mortgage?
Unfortunately, you may find that you are unable to sell your home for an amount that allows you to pay off the rest of your mortgage.
As you might expect, this is a situation that you want to avoid at all costs. If you must sell your property and the market isn't conducive to selling it for a sufficient price, you'll need to make up the difference yourself.
So, let's take another look at the above scenario and assume that you purchased a home for $500,000 but could only sell it for $400,000. In order to fulfill your mortgage loan agreement, you'll need to pay the other $100,000 yourself.
If this isn't a viable option, you might have to consider a short sale. For those who are unfamiliar with this term, a short sale occurs when a home can only be sold for less money than it is worth and the lender agrees to accept less money on the borrower's outstanding debt that they are owed.
So, in a short sale on the above home, the mortgage lender would resolve the loan with the $400,000 the home sold for. A short sale will negatively impact your credit score, though, which can make it harder to buy a home in the future.
How Can I Make The Process as Easy as Possible?
Put simply, you want to find a buyer that understands your situation and is willing to help make the sale go as smoothly as possible.
For example, many people make a career out of investing in real estate properties. So, it's in their best interest to acquire as many properties as possible as long as it will be profitable long-term for them.
To elaborate, you can check with local investors who buy homes to see what they're willing to do for you. More often than not, you'll be able to reach an agreement that prevents you from having a short sale of your home and allows you to pay off your mortgage entirely.
Selling a House with a Mortgage Can Seem Difficult
But the above information will make the process far smoother. In fact, you'll find that selling a house with a mortgage isn't nearly as complicated as you first thought.
Want to learn more info you should keep in mind? Be sure to explore what the rest of our blog has to offer.