Key Takeaways
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You can sell a home with a mortgage by paying off the loan at closing.
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Home equity matters most when determining if you’ll walk away with profit.
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Options exist for underwater mortgages, including short sales or covering the difference.
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You can buy before you sell with strong finances or bridge loan programs.
Selling a house with a mortgage is one of the most common real estate transactions today. Most homeowners still owe money on their loan when they decide to move. The good news is that having a mortgage doesn’t stop you from selling your home. The key is understanding how your loan will be paid off at closing and making sure your property’s value covers what you owe.
How Selling a House With a Mortgage Works
Yes, you can sell a house that still has an outstanding mortgage. At closing, your lender gets paid first from the buyer’s funds. After paying off your mortgage balance and covering closing costs, the remaining proceeds belong to you.
The most important factor is home equity. Equity is the difference between your home’s market value and your mortgage balance. If your home is worth more than you owe, you can sell with no issues.
Example: If your home sells for $400,000 and you owe $120,000, your lender receives $120,000 from the sale. After subtracting closing costs and fees, the rest is yours to keep.
Steps to Selling a House With a Mortgage
| Step | Action | Why It Matters |
| 1. Get a Payoff Statement | Request a payoff statement from your lender. | Shows the exact loan balance, including interest and fees, on your closing date. |
| 2. Estimate Home Value & Net Proceeds | Research comps, use online valuation tools, or work with an agent. | Helps you understand equity and predict how much you’ll take home. |
| 3. Work With a Real Estate Agent | Partner with an experienced agent to price, market, and negotiate. | Increases your chances of a profitable sale and smooth transaction. |
| 4. Close and Pay Off Loan | At closing, the lender gets paid directly, and any remaining funds go to you. | Ensures your loan is satisfied and you receive your proceeds. |
What If Your Mortgage Is Underwater?
If you owe more than your home’s value, you’re considered underwater. Options include:
- Short sale: With lender approval, you sell for less than you owe. This impacts your credit.
- Covering the difference: Use personal savings or other assets to pay off the shortfall.
- Waiting to sell: Rent out the property or hold until values rise.
Buying a New Home Before Selling
Many homeowners want to buy before selling. If your finances are strong, you may qualify for a new mortgage while still carrying the old one. Some sellers use bridge loans or work with companies that help you purchase before selling your current home.
Bottom Line
When you sell a home with a mortgage, your loan gets paid off at closing. As long as your property is worth more than what you owe, the process is usually straightforward. Start by requesting a payoff statement, estimating your equity, and partnering with a real estate agent who can help you maximize your profit.
FAQs About Selling Your Home That Has a Mortgage
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