What Happens to My Mortgage When I Sell My Home for Cash?
Selling your home while you still have a mortgage is totally possible and usually not too complicated.
In this guide, we’ll break down what happens to your mortgage when you sell your home for cash. We’ll also cover different ways to sell a mortgaged home and factors that can affect the sale.
Can I Sell My Home for Cash with a Mortgage?
Yes, you can sell your home for cash even if you still have a mortgage on it.
Equity is key when selling a property with an existing mortgage. Your home equity is the difference between your house’s current value and the amount you still owe on your mortgage.
For instance, let’s say your house is worth $300,000, and you owe $120,000 on your mortgage. That means you have $180,000 in equity.
If you sell your house for the full $300,000, that $180,000 is the cash you’ll get after paying off your mortgage and covering any closing costs or other expenses.
Having positive equity is important because it means you can pay off your mortgage when you sell your house. As long as you sell your house for more than you owe on your mortgage, you’ll be able to clear the loan.
Your equity increases as you pay down your mortgage. It can also go up if the value of your house goes up because of the market or because you make improvements.
When you sell your house, the first thing the money goes towards is paying off your mortgage. Any extra money that’s left over after that is yours to keep.
This way, the mortgage lender gets paid back in full and you’re free and clear of your mortgage debt.
Other Ways to Sell a Home With a Mortgage
Here are some other ways to sell a home with a mortgage.
Traditional Sale
Listing your home with a real estate professional is the most common method.
A real estate agent can help you market your home, find cash buyers, and handle most paperwork and negotiations.
This method is suitable if you’re not in a hurry and don’t mind paying the associated commission and closing costs.
For Sale by Owner (FSBO)
Selling your home yourself can save you from paying commission fees to a real estate agent.
However, this method requires more effort, time, and knowledge about the selling process.
You’ll need to handle all marketing, showings, negotiations, and legal paperwork on your own.
Cash House Buyers
Cash house buyers often buy homes for cash and can close quickly, sometimes within days.
This option can benefit you if you need to sell your home faster than you could on the open market.
iBuyers
iBuyers are companies that make instant cash offers on homes, often through an online platform.
This option offers a quick and convenient sale process, although the offers might be slightly lower than the market value due to convenience.
Factors That Affect the Cash Buyer Sale
Here are some factors that affect selling your home to cash buyers:
Market Conditions
The current state of the real estate market significantly influences how quickly you can sell your home and the price you can get.
In a seller’s market, where demand exceeds supply, homes tend to sell faster and at higher prices.
Conversely, in a buyer’s market, where supply exceeds demand, selling may take longer, and prices might be lower.
Home Condition
The condition of your home plays a crucial role in attracting buyers.
Homes in good condition, with up-to-date maintenance and curb appeal, are more likely to sell quickly and for a higher price.
Consider making minor repairs and improvements to boost your home’s appeal.
Location
Location is a critical factor in real estate.
Homes in desirable neighborhoods with good schools, amenities, and low crime rates typically sell faster and at higher prices.
Conversely, homes in less desirable areas might take longer to sell.
Pricing
Setting the right price is crucial.
Overpricing your home can cause it to sit on the market for an extended period, while underpricing can result in a loss of potential profit.
Research comparable home sales in your area and consider getting a professional appraisal to determine a fair and competitive price.
Outstanding Mortgage Balance
The amount you still owe on your mortgage will affect how much money you receive from the sale.
Ensure the sale price is sufficient to cover the remaining mortgage balance.
If the sale price is less than what you owe, you might need to negotiate a short sale with your lender.
The Selling Process
Selling your home for cash follows these processes:
Get an Offer
Once you receive a cash offer, review the terms to ensure they meet your financial needs and cover your outstanding mortgage balance. It’s essential to consider the offer’s value, the buyer’s proof of funds, and any contingencies.
Accept the Offer
If the offer is acceptable, you proceed by accepting it.
This acceptance typically involves signing a purchase agreement, which outlines the terms of the sale.
Pay Off the Mortgage
At closing, the mortgage lender will be paid directly from the sale proceeds.
The closing agent will handle this payment, ensuring that the mortgage is fully satisfied.
Any remaining funds after paying off the mortgage and closing costs will be transferred to you.
Close the Sale
Complete the necessary paperwork and finalize the sale.
During the closing process, you’ll sign various documents, including the deed transfer and closing statement.
Once the sale is closed, ownership of the property is transferred to the buyer, and you are released from the mortgage obligation.
Can Having a Mortgage Stop You From Selling Your Home for Cash?
Having a mortgage on your property generally won’t stop you from selling your house.
It becomes a potential roadblock only if you owe more than the current market value of your home, a situation known as an “underwater mortgage.”
Here’s how an underwater mortgage can complicate the sale:
Lender Limitations
Your mortgage lender might have clauses restricting the sale of the property for less than the outstanding loan amount.
This protects their investment but can prevent you from accepting a lower offer that reflects the current market value.
Buyer Discouragement
Even if you’re willing to sell for less than what you owe, attracting buyers becomes more challenging.
Many potential buyers rely on mortgage financing themselves.
They’ll likely be hesitant to pay a price that exceeds the appraised value, especially if the appraisal reflects a lower market value than your loan amount.
This can significantly limit the pool of interested buyers and potentially force you to lower the price further to attract a buyer.
On the other hand, if your home’s market value is greater than your remaining mortgage balance, you should be able to sell your property without encountering issues related to your mortgage.
The proceeds from the sale can then be used to pay off the remaining loan amount and leave you with the profit from the sale.
Sell Your Mortgaged Home for Cash With Grandview Homes
Selling your home for cash can provide a quick, convenient, and stress-free solution even if you still have an outstanding mortgage.
When you sell your home to a trusted cash house buyer like Grandview Homes, your mortgage will be paid off directly from the sale proceeds.
This means you don’t have to worry about making additional payments or managing the mortgage payoff yourself.
At Grandview Homes, we purchase homes in any condition, eliminating the need for repairs or extensive cleaning.
We can finalize the sale within 7-10 days, significantly faster than traditional methods, allowing you to settle your mortgage quickly and move forward with your life.
Contact Grandview Homes today to receive a fair cash offer within 24 hours and find out how we can help you manage your mortgage payoff.
