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Selling your property while you still have a mortgage balance

This article will give you an overview of what to do when considering whether or not to sell your home with a mortgage balance outstanding.

What to do before selling a home with a mortgage balance

When selling your home with a mortgage balance, you should consider two main factors before selling. The first factor is how much equity you have left in your house after subtracting what's owed on the mortgage from its current market value. This can be found by dividing the market value of your property by the remaining balance on the loan.

The second factor that should be considered is whether or not it's wise for you to pay off any remaining balance on the mortgage before trying to find a buyer. To make this decision, you need to know how much equity you have left in your house and if it's worth it for you to spend more money paying off the outstanding remaining mortgage before selling. You will also need to find you're subjected to prepayment penalties.

Should you pay off the balance before listing

To determine if paying the balance before listing will be beneficial, you should first contact your lender to see if you're subjected to a prepayment penalty. Prepayment penalties are fees charged by the lender when the mortgage is paid off early. These penalties can range from a few hundred dollars to thousands of dollars, so it's important to factor them into your decision-making process. Some lenders will waive or reduce prepayment penalties if there is a good reason for paying off the mortgage early, such as a job transfer or a change in family circumstances.

Then you should find out how much time is left until the loan agreement expires. Suppose it's less than a year before the remaining term ends. In that case, it might be worth paying off any remaining balance so that you can sell without having to pay the additional interest along with other closing costs.

However, if there are several years left before it expires, then selling your house while you still have a mortgage may work out better for you in some situations. For example, this could allow you to enter into a new lending arrangement and receive more favorable rates than selling your home with a remaining balance.

What is equity?

When you own or buy property, it's paid for in part with cash and in part with a loan agreement called a mortgage. The amount of money that remains after this transaction is equity. Equity can also be found when subtracting what is owed on the mortgage from your home's value or selling price.

Selling your property with no equity

When selling a home with no equity, there are a few things you'll need to take into account. For example, you'll need to factor in the closing costs, which can be pretty expensive. Additionally, you'll need to make sure that the sale price of your home is enough to cover the outstanding balance on your mortgage. If it's not, you'll have to consider the following:

  • Wait for a better market

  • Ask your lender for a short sale

  • Pay the difference out of pocket

Wait for a better market: If your home is underwater and you're looking to sell during a buyer's market, it may be a better idea to wait for the market to pick up in your favor.

Ask your lender for a short sale: Your lender may lower your balance to allow you to sell your property to avoid foreclosing on the home.

Pay the difference out of pocket: If you can come up with the funds to cover the remaining balance owed after the sale of your home, this option may be best for you.

How is the mortgage balance paid off when closing?

The mortgage balance is paid when selling the home through the proceeds. The selling price will be calculated based on what is left on the mortgage after selling the property. The remaining amount of money after your mortgage payoff, commissions, and fees will be paid to you at closing.


If selling while still having a mortgage balance sounds like it could be the right move for you, then take steps such as running an appraisal and getting an estimate of how much interest you'll end up paying if selling will cost you extra in most cases. Look into the market and consider selling now, or wait until later to sell when possible problems like appreciation and unpredictable economic conditions may work in your favor. Selling while still having a balance on your mortgage can be a tricky business; make sure to do everything run by a professional Miami real estate agent before making any decisions.


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