Selling a Home with a Mortgage: What You Need to Know

Selling a home can feel like a daunting process, especially when you still have a mortgage to pay off. But it’s totally doable with the right approach. This post aims to provide clear steps for sellers who are still paying a mortgage on their property.

Knowing how to handle your mortgage balance is crucial when preparing to sell your home. This understanding ensures you’re not caught off guard by financial surprises during the selling process. It helps us accurately price your home, plan for closing costs, and ensures a smoother transition to your next home. Being informed can also prevent potential delays in the sale, saving you time and money.

Step 1: Understand Your Mortgage Balance

• Reach out to your mortgage lender directly. You can call their customer service line, visit a local branch, or log into your online mortgage account to request the most up-to-date payoff amount.
• Check your most recent mortgage statement. It usually includes the current balance, interest rate, and other important details. However, for the exact payoff amount, it's best to contact your lender, as this statement may not reflect the latest transactions or interest accrued.

Step 2: Determine Your Home's Market Value

• Get a Comparative Market Analysis (CMA): A CMA provides a detailed assessment of similar homes in your area that have recently sold, are currently on the market, or were listed but didn't sell. This data helps you price your home accurately and competitively based on current market conditions.

Why market value matters? Understanding current real estate trends in your area is crucial for making informed selling decisions and setting the right price for your home. here are some key points:

1. Rising home prices - For example the median sale price in Wilkes-Barre has increased by 44.5% over the past year, reaching $184,000
2. Quick sales - Homes are selling faster than before, with the average home staying on the market for 25 days compared to 15 days last year. This quick turnover suggests that well-priced homes are likely to attract multiple offers.
3. Market Competitiveness - The housing market is somewhat competitive, with some homes receiving multiple offers and even selling above the list price. This competitiveness can work in your favor if your home is priced correctly.

Step 3: Decide Whether to Pay Off the Mortgage Before Selling

Assess your current financial position, including your savings, income, and other debts. Determine if you have the funds available to pay off the mortgage without affecting your financial stability.

Paying off your mortgage early can impact your tax situation. Mortgage interest is tax-deductible, so eliminating this deduction could increase your tax liability. Consult with a tax advisor to understand the implications.

Speak with a financial advisor to get personalized advice based on your unique circumstances. They can help you weigh the pros and cons and make an informed decision.

Step 4: How the Mortgage Payoff Works at Closing

Once you obtain your payoff statement from your lender, you then share it with your settlement agent or closing attorney. They will use this information to ensure the correct amount is allocated to pay off your mortgage at closing.

Carefully review the closing disclosure, which outlines all the financial details of the transaction, including the payoff amount. Confirm that the payoff amount matches the information provided by your lender.

After the payoff is complete, obtain written confirmation from your lender that the mortgage has been fully paid off and the lien has been released. This documentation is important for your records.

Step 5: Plan for Profit or Loss After Payoff

By understanding the financial aspects of selling a home, you can better prepare for your next steps, whether it’s upgrading to a larger home, downsizing, or renting while saving for a future purchase.

Scenarios Where Sellers May Make a Profit: If the housing market has appreciated since the home was purchased, you may sell for significantly more than their remaining mortgage balance. Or if you have paid off a significant portion of your mortgage or owned the home for a long time will have more equity.

Scenarios Where Sellers May Experience a Loss: If you bought your home recently or refinanced with a high balance may owe more than the sale price covers. Discovering liens on the property during the selling process may lead to unexpected costs and reduce net proceeds.

Step 6: Work with a local Realtor to Streamline the Process

Partnering with a knowledgeable and experienced realtor in your area can make the selling process much smoother and more efficient. Here’s how a local realtor can help:

• A local realtor has an intimate understanding of the local market. They are aware of the latest market trends, neighborhood dynamics, and buyer preferences. This knowledge ensures that your home is priced competitively and positioned to attract the right buyers.
• Realtors have a network of trusted local professionals, including home inspectors, contractors, and attorneys, who can assist with any repairs, inspections, or legal matters, ensuring your home is in top condition for sale.

Conclusion

Selling a home with a mortgage doesn’t have to be overwhelming! Understanding the financial outcome of selling a home with a mortgage is crucial for planning the next steps in homeownership. Whether you’re profiting or breaking even, knowing your net proceeds can guide your next purchase, help you determine an appropriate budget, and shape your overall financial strategy. As a trusted realtor, I can help you navigate these scenarios, ensuring a smooth transition to your next chapter.