Like many Memphis residents, you may be wondering what happens to your mortgage when you sell your Memphis home. In general, selling a house can be a whirlwind of making home repairs, figuring out a selling strategy, and then packing up everything and moving out. Your biggest concern will probably be figuring out ways to sell your home fast, and you may forget to find out if you can sell a house before paying off the mortgage. This article will share some helpful information to answer all your questions about selling a house before paying off your mortgage in Memphis and what steps you should take to get started.
Can You Sell a House With a Mortgage?
Many Memphis homeowners have been asking, “can you sell your house with a mortgage?” The good news is that you can! Most people actually sell their homes before paying their mortgages off, and it usually isn’t a problem. Even though you agreed to a loan term of 15 to 30 years, that doesn’t mean you are locked into living in the residence for that amount of time before selling. Within 15 to 30 years, life changes, resulting in the need for different housing arrangements. So you definitely can sell your home before paying the mortgage off.
How Your Mortgage Works
When you apply for a mortgage, your mortgage lender determines how much you qualify for and will provide you with a specific amount of money to purchase a home with. In turn, you commit to paying back your mortgage -with interest- over a 15 or 30-year term. Each month that passes, the sum builds interest. So, in the beginning, you will be paying more towards interest on the loan than your premium (the actual home price). As the years’ pass, a larger part of your payment will go towards the actual home (the premium).
What Is Included in the Mortgage Payment?
Your mortgage payment is a predetermined amount paid every month toward your loan. The predetermined amount includes four major parts: principal, interest, taxes, and insurance.
The principle is the amount of money left to pay on the loan. For example, if you borrow $200,000 to buy a house and pay off $5,000, your principal is $195,000. To find out how much you owe in principle, check your monthly statement.
Part of your monthly payment on your home loan will automatically be towards paying down your principal. However, people can pay extra money just towards the principal by making additional payments, which is a way to reduce the total amount owed and get charged less interest on the loan overall.
The amount you pay in interest is based on your loan principal and interest rate. The amount of money you pay in interest goes directly to the mortgage provider/bank. As the loan ages, you will pay less in interest as the principal amount decreases.
Taxes and Insurance
If your mortgage has an escrow account, your home loan payment may include Memphis property taxes and homeowner’s insurance fees. The lender keeps the money you’ve paid towards taxes and insurance in an escrow account. Whenever the taxes and insurance premiums are due, the lender uses that money set aside to pay those bills for you.
Things To Remember Before Selling Your House
When selling a house with a mortgage, there are a few things you should do before you sell your home. The first thing you should do if you’re thinking about selling is to contact your mortgage lender and get a current mortgage payoff amount. The loan amount information you get is usually valid for 10 to 30 days before additional interest is added and changes the amount. Why does this matter? Finding out your outstanding balance on the loan will help you come up with a listing price. Furthermore, you will need to use the money from your property sale to pay off your mortgage.
It is also wise to review your home loan paperwork and look for any due-on-sale clauses. Due-on-sale clauses protect mortgage lenders by requiring homeowners to pay their mortgage in full after selling their residence or transferring their deed to someone else. Even though your lender will want to make sure that your loan is paid in full before someone else moves into your property, their involvement in the home-selling process will be limited. They might need some info about your buyer’s mortgage lender, but besides that, under no circumstances can they tell you who you can or can’t sell your house to. As long as the buyer can get preapproved for a mortgage loan, there shouldn’t be any problems.
Steps in Selling Your House With A Mortgage
When you sell your home, paying off your mortgage is not as simple as handing over a check to your lender. Below are a few steps you will need to take if you still owe money on your mortgage when selling a house.
Step 1: Get a Payoff Amount
Find out how much you owe on your mortgage. Before you sell your house, the first thing you need to do is contact your mortgage lender to ask for the payoff amount. The total payoff amount is the full balance of what is left on your home loan. You will need this information to help you set the asking price for your home and to make sure you have enough to cover paying your mortgage.
Step 2: Do a Title Search
Either your mortgage lender will recommend a title agent, or you will need to search for one. The title agent or title company will research your title to verify there are no issues like liens against your property. Liens are legal claims or rights against a property. Liens are placed on houses to satisfy debts and obligations. Your title agent may ask for your payoff amount and account number for the home loan.
Step 3: Figure Out How You’re Going To Sell The House
After you figure out how much you owe and if any liens will have to be paid when you sell your home, it’s time to figure out your selling strategy. Typically people look at these options:
- Selling with a local real estate agent
- Selling by-owner
- Selling to an iBuyer
Each option has its pros and cons. Keep in mind when deciding which route is best for you to look into the actual cost of selling your home.
Each of these options has either fees, commissions, services charges, repair costs, and closing costs associated with them. Those can amount to thousands of dollars coming out of your pocket and affecting the amount you can use to pay off your home loan.
Some of the selling options may require decluttering the house and staging it for prospective buyers.
Selling with an agent or an iBuyer will require less effort than selling by owner but will cost you the most.
And selling by-owner may seem like a breeze, but it really isn’t. The hardest thing for people who sell by owner to figure out is the listing price. Pricing too high will result in your house sitting on the market for months; pricing too low may turn buyers away, thinking something is wrong with the house for being so inexpensive.
Furthermore, if you need to sell your home quickly, some of these selling strategies could take months before your home officially sells- leaving you to pay more monthly mortgage payments.
→ Click here to find out The Worst Times To Sell Your House in Memphis.
So figuring the best selling strategy for your particular situation will be key to selling your house and paying off your mortgage.
Step 4: Closing
Once you figure out your selling strategy and hopefully get an offer, the next step will be to start the closing process. During the closing process, all the necessary documents are signed and the title agent will send over your final mortgage payment to your lender. Then the title agent will transfer the title over to the new buyer. Once that is done, you’ve officially closed out your mortgage and sold your Memphis home.
What Happens To Your Mortgage When You Sell Your House?
When your property sells, the proceeds from the sale will be used to pay off your outstanding mortgage amount. If you didn’t make enough from the sale of your property to pay off your loan, you will need to make payments to the mortgage company until the loan is paid off. This is why some people consider refinancing or selling their home in a short sale instead.
But to clear up some confusion, when people go to sell, they think they have to pay the entire amount of interest divided over the 15 to 30 years. The thought behind that is that they agreed to that interest, meaning they have to pay all 15 or 30 years’ worth. But the good news is that is not the case. The interest is only owed for each month the loan is paid. Once the house officially sells, those interest payments stop, and you don’t get charged.
But you may not want to get too excited; sometimes, the lender has an early payoff penalty on the loan if you pay it back early. So before you sell your Memphis house, take a look over your contract with the lender for due-on-sale clauses- which is where penalty information should be noted.
What If Your Behind On Your Mortgage Payments…..
As we mentioned, selling a home with a mortgage is very common. And in most situations, putting your house on the market, finding a buyer, and settling your mortgage debt when the property sells is all you’ll need to do to pay off the mortgage.
But if you’ve started to get behind on your mortgage payments- or find yourself nearing the risk of foreclosure- you might be worried that the traditional way to sell a home could take too long.
Currently, the average days on market in Memphis is 33 days, and then escrow can take 30 to 60 days. And even if you were to get an offer, the buyer may have contingencies like getting a clear home inspection or buying the home once their house officially sells. Contingencies leave you at risk of a buyer backing out and having to start all over again- which can be overwhelming when a lot is riding upon the sale of your home.
→Wondering Why Your Home Isn’t Selling In Memphis, click here.
If you cannot afford to wait any longer, selling to a local investor could be something to consider. When you sell your house to a home investor like Fair Cash Deal, you can expedite the whole closing process by eliminating the appraisal and financing contingencies usually required by a traditional buyer. This would save you weeks or even months of expenses related to the house, like taxes, maintenance, and insurance.
Because Fair Cash Deal is a cash home buyer and they can close on houses within 7-14 days or longer if you need extra time. Paying in cash does not obligate them to wait on bank approval or financing.
This is also a great alternative if you are not looking forward to the thought of staging and showing your house during COVID.
When working with Fair Cash Deal to purchase your home, they have a simple home buying process– which includes no agent commissions or fees. They even help pay closing costs.
Fair Cash Deal will purchase your home in as-is condition, requiring no repairs or renovations; you can even leave the house dirty when you move out. If you’re looking at spending thousands of dollars on home improvements, this will save you the trouble and expense.
Don’t hesitate to get a cash offer with Fair Cash Deal – you will be under no obligation to accept.
If you would like to sell your house before paying off the mortgage in Memphis, give Fair Cash Deal a call today!