When You Sell Your Home, What Happens to Your Mortgage?
If you owe on your existing mortgage and are ready to sell, you may be wondering if you can do so while you still owe money. Rest assured, you are not alone. Most mortgages run 15 to 30 years, so many homeowners sell before the existing loan is paid off. It can be a bit daunting to apply for a second mortgage on new homes for sale in Overland Park KS before you sell the old one, but industry experts at Rodrock Homes at happy to walk you through the process.
What Is Your Mortgage Payoff Amount?
Obtain your current mortgage payoff, keeping in mind that, because interest is constantly accruing, this amount is valid for a set period. With this information, your agent can help you figure out your current borrowing capacity and help you determine the appropriate listing price.
The Simple Process
Ideally, you can sell your home and walk away with enough money to pay off the mortgage. In this scenario, your agent coordinates with the title company and your real estate attorney to put together closing documents that include a settlement statement. When the buyer closes, his funds are used to pay off the remainder of the mortgage and fees related to the sale. The balance is your profit.
When You’re Underwater (Short Sale)
In some cases, your house isn’t worth what’s owed on the mortgage. This is typically associated with a poor housing market. If you sell the home for less than you owe for it, the bank might be able to set up a short sale. If so, the lender agrees to the lower payoff to enable you to complete the sale. Note that a short sale can negatively impact your credit rating and ability to borrow.
There is another option called an assumed mortgage that’s approved on rare occasions. In an assumed mortgage, the lender agrees to let a qualified buyer take over the existing mortgage. This appeals to buyers if your loan rate is lower than the current market rates. Unfortunately, you must move before your home sells.
Taking on another month payment is a huge financial challenge since few lenders allow higher debt-to-income ratios than 55 percent, even if you have good income and credit. Other options include a bridge loan to cover the cost of new homes for sale in Overland Park KS or renting the old home to cover the mortgage.
Come to the experts at Rodrock Homes with your concerns, and we’ll help you understand your options.