If you’re ready to have a property taken off your hands, there’s always a way to do it – even if you still have an outstanding mortgage balance on the house. In fact, as surprising as it may be, selling a home with a mortgage is actually pretty common.
Whether you’re a homeowner looking to move onward and upward, an investor hoping to offload an old property or a landlord wanting to get out of the month-to-month rent race, selling a home with a mortgage is the way to make it happen.
Here are the three ways you can go about it:
Selling Your Home When You Still Owe on Your Mortgage
If you currently own a home and still have an outstanding on your balance, selling a mortgaged property is pretty simple. The main goal is to sell the property for more than you owe on the home. Then, the sale proceeds can be used to pay off the remaining mortgage balance, and you can keep the difference (if there is any).
This is how most home sales happen, as today’s homeowners rarely pay off their mortgages in full before selling their properties – especially if they have a 30-year loan.
In the event your mortgage is underwater (meaning you are behind on payments or the mortgage balance is greater then the current value of the home), you can still sell the property, but you will need special permission from your lender. This type of transaction is called a “short sale,” and though it will allow you to get the underwater property off your hands, it will also hurt your credit score in the process. This is important to note if you plan on purchasing another property or taking out another loan in the near future.
Selling Your Home with a Mortgage Using Seller-Financing
The second option is to sell your home and finance it for the next buyer. This is called “seller financing.” Essentially, you act as the “lender” to your new buyer. They give you a down payment and monthly “mortgage payments,” which you then put toward the actual mortgage loan you still owe on.
Seller financing – also called a wrap-around mortgage in this case – can be a great option if you’re looking to move out of your home quickly, want to avoid the red tape of traditional lenders or want to consider potential buyers who might not qualify for a loan in the traditional sense.
Keep in mind though, it is a balancing act! You must structure the contract and payments properly to ensure you have enough to cover the monthly payments to your lender. If you plan on offloading your seller-financed mortgage to a note buyer (which is highly recommended if you don’t want to be responsible for dealing with month-to-month payments anymore), then you’ll also need to be careful about the terms and structure of your deal.
You’ll also want to make sure you don’t have a “due on sales” clause in your current mortgage contract that would preclude you from seller financing the property. If you’re not sure on this one, consider talking to a real estate attorney before moving forward.
Selling a Home and Your Mortgage at the Same Time
Finally, you could forgo the real estate market altogether and sell your mortgage note and the property’s security instrument at the same time. The method of this would depend on the exact state your property is located in, but generally, you would sell your home’s real estate contract, deed of trust, mortgage deed or even land contract to a note buyer, as well as the existing mortgage loan you have on the property.
If you’re considering going this route, make sure you study up on how to sell real estate contracts, so you can structure your deal properly and maximize your returns.
Thinking of Selling a Home with a Mortgage?
Note Buyers are Often the Answer
When it comes time to move on from a property – whether as a homeowner, investor or landlord – note buyers are often the answer you’re looking for, especially if you’re selling a home with a mortgage in tow.
Not only can note buyers purchase real estate contracts, deeds and land contracts quickly and easily, but they can also take the actual mortgage loan off your hands, too. And as most offer cash for these types of transactions, it can make buying your next property, investment, or endeavor even easier.
Note buyers can also speed up the time it takes to offload your property or loan. Because they allow you to seller finance a home without a long-term commitment to managing that loan, they can take a lot of the red tape and time-consuming hassle out of the typical sales process.
Can You Sell Your House Before Paying Off the Mortgage?
As you can see, the answer is a resounding yes; you can sell a house with a mortgage.
Though mortgage loans are structured with the goal of ultimately paying them off in full, few homeowners ever reach this point. Many refinance or move out of the home before their loan term is up, and therefore selling a home with a mortgage has become quite common.
Fortunately, selling a mortgaged property or home is quite simple – especially with a note buyer on your side.
Buying notes quickly and at top-dollar is our specialty, and we’re here to help.