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Can You Sell a Home If You Still Owe on Your Mortgage?

By Christopher Coble, Esq. | Last updated on

The repayment time of a home mortgage loan can run anywhere from 10 to 50 years, and a lot can happen in that amount of time. You may need to relocate for work, or want to relocate for retirement. You may add children to your nest or become empty nesters, necessitating more or less space. Or maybe it turns out the house you bought just isn't for you.

There many reasons we would want to sell a home, but is it possible to sell your home if you haven't paid it off yet? Here's what you need to know, legally, about selling a home if you still owe money on your mortgage.

What You Owe

The only thing stopping you from selling your home before you've paid off your mortgage is your lender, because, technically speaking, you don't own the home outright yet. A mortgage is a transfer of an interest in real estate as security for the repayment of a loan, meaning whoever lent you the money to buy the home in the first place owns the home until you repay the loan. If you default on your mortgage (through missed or inadequate payments), the lender is entitled to foreclose on the real estate, repossess it, and have it sold to reduce the debt.

That said, most lenders are open to working with home sellers under certain circumstances.

What Your Options Are

The simplest way to sell a home you still owe money on is to sell it for more than what you owe. Banks and lenders are generally willing to sign off on a sale if they are confident they will be repaid the remaining mortgage balance. Your real estate agent or attorney can work with your mortgage holder and title company to prepare loan closing documents or a settlement statement. When the home is sold, those funds are used to pay the remaining balance on your loan and you can retain the remainder (if any) as profit on the sale.

Things get more complicated if the home is not worth what you currently owe on your mortgage. In that case, you may be able to work out a deal with your lender where they are willing to accept a reduced payoff amount for the loan once the home is sold. In some rare instances, lenders may accept an assumption of the mortgage, where the home buyer agrees to pay off the remaining debt. But the new buyer will likely need to meet certain income or credit requirements in order to do so.

If you have more legal questions about buying or selling a home, contact an experienced real estate attorney today.

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