If you are planning to sell a property with a mortgage on it, you need to make sure that you understand the repercussions of doing so. If you sell the property before you've repaid the remaining balance of the loan, you will likely owe the lender the outstanding balance. This is known as a balance owed and is typically added to the outstanding mortgage balance. This balance owed is known as a deficiency.
You’ll probably need to pay back your mortgage company in full.
If you sell your house, you will need to pay back the outstanding balance on your mortgage to your lender. It doesn’t matter if you refinance or simply pay off the remaining balance owed. Your lender will normally place a lien on your house to secure the amount you owe them. A lien is a legal claim on your house until the debt is paid off.
Be prepared to pay the buyer’s agent commission.
Once you accept the buyer’s offer, the buyer’s agent will submit the paperwork to the lender to process a loan and fund the purchase. The buyer’s agent will usually need to have proof of funds as well as proof of insurance before the loan can close. The buyer’s agent will submit the final paperwork to the county and the county will issue a certificate of compliance, which is essentially giving the buyer the green light to move in.
You might have to pay back any home loan points.
If you sell a house with a mortgage on it, you'll owe the lender the outstanding balance plus any accrued interest. If your mortgage has a fixed interest rate, you'll owe the total amount in principal you owe in addition to any accrued interest. If your mortgage has an adjustable rate, you'll owe the portion of your principal that's equal to the percentage your interest rate has increased since the beginning of your loan. For example, if your interest rate is eight percent and it's increased by one percent since your loan began, you'll owe the difference between your original principal amount and the new principal amount in your loan, plus accrued interest. The remaining balance will be cancelled.
If the buyer decides to rent the property, you’ll owe them rent.
If you sell a property with a mortgage on it, you’ll need to pay off the remaining balance on the loan before you transfer ownership. Otherwise, the buyer will have to pay the remaining balance to the lender in full, plus interest.
If you want to sell the house again, you’ll need some money.
If you have a mortgage, you’ll need to pay off the balance before you can sell your property. If you don’t, the lender will likely recover the remaining balance. You’ll likely owe them some interest. You may owe additional fees as well.
You might have to pay a fee to your mortgage company.
If you sell a house with a mortgage on it, you will typically have to pay off the remaining balance in the loan. If the remaining balance is more than the market value of the house, then you will owe the mortgage company the difference between the mortgage balance and the market value. If the market value of the house is less than the remaining balance, you will owe the mortgage company a certain percentage of the remaining balance. The percentage of the remaining balance you will owe depends on the type of loan you have and the terms of your mortgage agreement.
Be aware that there are other costs to selling a house with a mortgage.
When you sell a home with a mortgage on it, the bank is the first in line to get its money. After the bank's mortgage is satisfied, the remaining proceeds of the sale are given to the owner, less the real estate agent's commission. If the remaining net proceeds are less than the outstanding principal on the mortgage, the remaining balance becomes an "unsecured" debt owed by the former owner to the bank.
Conclusion
After you sign the final paperwork and hand over the keys, you’re legally the owner of the property. However, you may still owe the bank the remaining balance on the mortgage. When you sell your house, the bank will want proof that you’ve paid off the remaining balance. They’ll usually hold onto the funds until they receive proof. They’ll then transfer the money to you once they verify the information.