The trend of selling the house before the current mortgage is paid off is a common phenomenon among homeowners. The purpose of selling the house with a mortgage could be relocation to another area or buying a new home in the same area to expand the floor space due to the growing number of family members. If you are mentally ready to sell the house, but the thought of a mortgage is holding you back, it's time to understand the procedure, the facts, and careful evaluation of the financial implications. In this article, we discuss different aspects of selling a house with a mortgage.
Should You Sell the House With a Mortgage?
Whether you should sell the house with a mortgage or not entirely depends on the reason to sell and the assessment of the after effect of the sale process. The reason to sell could vary from grabbing new opportunities or resolving financial issues. Here are some pros and cons to focus on before concluding to sell the house with a mortgage.
Pros
It's profitable to sell when you get a lower interest rate on the new mortgage, as it will help you save more. Also, when you continue with the original payment amount and buy the new home at a lower interest rate, you can pay off the mortgage sooner than the planned repayment date. You can also take advantage of the conducive market conditions to maximize the market value of the home.
Cons
The prevailing economic conditions hugely impact the seller's ability to qualify for the new mortgage, pushing toward renting a house. Paying a mortgage amount early may result in high prepayment penalties or higher fees.
Can You Sell Your House With a Mortgage?

Yes, you can sell a house with a mortgage and use the sale proceeds to pay the balance mortgage amount. However, you should see if the home's equity (the difference between the current market value of the home and the amount you owe on the mortgage) is more than the pending mortgage amount.
If you get a selling amount higher than the mortgage amount, it's beneficial to sell the house and pay the balance mortgage. There are other costs associated with the home selling, like commission to the agent and closing costs, so the sale value of the house should be enough to cover the mortgage payoff as well as other costs so that you don't have to use your savings or use other funds to bear the expenses.
Process to Sell a House With a Mortgage
Request Lender for a Payoff Statement
The primary work when selling a house with a mortgage is to contact the lender for a payoff statement or a letter to know the exact amount you have to pay to the mortgage company for selling the house. The statement has instructions on how to pay the final installment, the amount to pay, the due date of payment, as well other charges, including penalties for early payment.
Assess the Home's Value and the Exact Sale Proceeds
Once you know the mortgage amount, it's time to assess the value of the home and the sale proceeds. However, the concern is how to get an estimate of the value. The best place is comparable homes sold in your area or up for sale in the market. The other option is to seek help from a real estate agent.
Punching your address into an automated valuation model can also give an approximate worth of the home. Approach a professional home appraiser to get the exact market worth of the house.
Fix the Right Time to Sell the House
Determining the right time is a subjective issue which depends on various factors discussed below:
Reason to move: If you plan to move for better career opportunities elsewhere, then anytime is the best time. However, if you want to benefit from the strong housing market, check the accurate sale price and proceed.
The market condition: The market price of a house is determined by demand and supply. If there are less number of homes available for sale in your area, the chances of getting a higher price are high as you have the bargaining power.
The confidence to find a new house: Be confident that you can get the desired house by mapping the market from the buyer's perspective as well.
Find a Real Estate Agent to Help You Set the Right Price

Once you realize that the sale proceeds can pay off the remaining mortgage amount as well as other expenses, it's time to look for a real estate agent who can help you fix the fair listing price. These agents map the market and understand the buyer's requirements well, so they set a price that attracts multiple buyers to give you the best market price.
Deck Up Home for Sale
Finally, it's time to prepare the house for sale. It involves decluttering the house and deep cleaning to leave a positive impact on the potential buyers. The buyers must get the impression that the seller is a serious seller. Also, remove the personalized items from the house leaving only the everyday use furniture so that the potential buyers get enough space to visualize themselves in the house.
You should also enhance the look of the house by repairing and replacing small items such as cabinet knobs and applying a fresh coat of paint or placing indoor and outdoor plants for positive vibes.
Sell the House and Clear the Mortgage Payment
Finally, it's time to close the deal by processing the purchase and sale agreement after the buyer gets the house inspected. Once you close the deal, pay off the balance mortgage amount, other fees, and closing costs and keep the rest as your profit.
Can You Sell a House With Negative Equity/ Underwater/ Upside-Down?
No matter how you address the negative equity, the primary query is whether you can sell a house with negative equity or not. Negative equity means the worth of your home is less than the amount you owe. Yes, you can sell the house with negative equity as well, but you will have to pay off the entire mortgage amount with the sale proceeds. For homes with negative equity, the following options are suggested:
Short sale: A short sale means selling the house at a lesser amount than you owe, but you need permission from the lender to sell in this situation. The lender has to agree to bear the loss and accept a lesser amount. However, it affects your credit score for future mortgages. Be mindful of every step.
Put the sale on hold until the home value rises: If there's no financial crunch or urgency to move, wait until the market value improves and gives you a better sale value to pay off the mortgage without affecting the credit score.

Pay the mortgage amount from savings or investments: One option to consider when selling a home with negative equity is to pay the balance mortgage amount from your savings or by selling investments. Though it pinches to pay from the savings and investment, it will save your credit score.
What Happens to the Mortgage When the Loan is Backed by the Government?
In the case of a loan backed by government entities like FHA, VA, and USDA, you can sell the house without paying off the pending mortgage; rather, the buyer takes over the loan with the same existing terms and conditions.
Conclusion
Whether to sell a house with a mortgage or not is debatable. As a homeowner, it's your prerogative to decide if you want to sell the house with a mortgage, considering all the pros and cons. There are two aspects of selling a house with a mortgage: one is when you get the sale value more than the mortgage, and the second is when the sale value is lower than the mortgage amount. After reading this article, we hope you got a better idea to proceed with your calculated decisions.