How to sell a house with a mortgage

Can you sell a mortgaged home? What happens to the mortgage when selling the house?

Over time, various reasons may arise for changing homes, such as a job change, divorce, or family growth. However, there is no legal restriction preventing the sale of a home with an active mortgage.

Even if the property is put up for sale, the outstanding debt does not disappear since it is linked to the house and the contract signed with the bank. Therefore, it is essential to understand your current mortgage situation in order to find the best solution for your needs.

How to sell a house with a mortgage step by step

Below, we list the steps you need to follow before selling your mortgaged house:

Check your outstanding mortgage balance

The first step is to request a Mortgage Debt Certificate. This information is essential to determine whether the sale price of the property will cover the debt and to evaluate the available options.

To obtain this information, you can contact your bank and request a balance statement or payoff letter. Alternatively, if your bank offers online banking, you may be able to check this data there.

Determine the selling price of your property

For a successful sale, it is advisable to set a competitive price that attracts buyers while ensuring you can pay off the mortgage and finalize the contract with the bank.

Start by analyzing the market price in your area or of similar properties. A good real estate agency can assist and guide you in this process. At Engel & Völkers, we compile an annual report with market trends and data.

In addition to understanding the real estate sector, it is advisable to get an appraisal of your mortgaged house or apartment to obtain a realistic and well-founded valuation. This data will also help in negotiating the price with the buyer. At Engel & Völkers, we offer a free valuation of your mortgaged home—just get in touch with our team.

Negotiate with the bank

The bank must authorize the sale and inform you of the different options available to settle the mortgage. Contact your bank and request a sale authorization before taking any action.

Additionally, this is a good time to discuss options such as flexible payments or more favorable conditions for early mortgage payoff.

Cover the associated costs

In addition to settling the debt with the bank, there are other expenses you need to consider. It is advisable to factor them in when setting the selling price of your property or to have savings available to cover them. Some of these costs include:

• Notary fees: A notary will formalize the sale and process the mortgage cancellation in the land registry.

• Mortgage deregistration fee: You may need to pay an additional tax, ranging between 0.5% and 1% of the remaining mortgage balance.

• Bank fees: Some banks impose penalties for early mortgage payoff. These cancellation fees can range from 0.25% to 0.50% of the total amount.

Options when selling a house with a mortgage

Depending on the conditions and requirements of your mortgage, there are several options you can consider when selling your mortgaged home:

Early mortgage payoff

The most common approach is to sell the property for a price higher than the outstanding mortgage balance. In this case, the mortgage is paid off using the sale proceeds, and any remaining funds become your profit.

Buyer mortgage transfer (subrogation)

In this situation, the mortgage is not paid off but transferred to the new buyer under the same conditions it was originally approved and signed. This is one of the most preferred solutions for selling a house with a mortgage. In this case, the bank must approve the process.

This option benefits both parties: the seller avoids early mortgage payoff fees, while the buyer takes advantage of the existing mortgage conditions.

Selling the house for less than the mortgage balance

If you decide to sell the property for less than the outstanding debt, you may be able to negotiate a debt reduction with the bank. That is, the bank may agree to forgive part of the debt.

This situation depends on the bank’s policies and your negotiation skills. If the bank rejects the request, you will need to pay the remaining amount.

Applying for a bridge loan

Lastly, you can request a bridge loan from the bank to facilitate the sale of your home. This means obtaining a new loan that covers the remaining mortgage debt while also financing the new property.

A bridge loan is beneficial because, instead of managing two separate mortgages, you only need to pay one, and at a lower amount than maintaining two separate loans.

Key recommendations for selling a house with a mortgage

Besides choosing the most beneficial option for you, it is advisable to follow these key recommendations to sell your mortgaged home as quickly as possible:

• Hire an experienced real estate agent: A professional in the field can provide guidance in this situation and recommend the best option for you. Having a qualified expert gives you access to a network of contacts that can streamline the process. At Engel & Völkers, we have over 800 branches in more than 34 countries, facilitating the sale of your property.

• Use home staging techniques: To speed up the selling process, it is recommended to apply this interior styling technique. Standardizing decorative elements and styles will make your mortgaged home stand out and attract potential buyers more quickly.

• Implement marketing strategies to stand out in the market: Given the vast number of listings in the real estate sector, we recommend using strategies to facilitate the process, such as professional photography of your property and creating an appealing listing description using AI tools. Additionally, consider answering common questions potential buyers might have before viewing the house to attract them more effectively.

As you can see, selling a mortgaged home is not impossible. There are multiple options available depending on your needs and requirements. You just need to choose the one that best suits you and is approved by the bank.

If you want to speed up the process of selling a mortgaged home, seeking expert advice can make all the difference. Simply contact our team.