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Can You Sell A House With A Second Mortgage
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You want to sell your home and move on to the next phase of your life, but the mortgage on your home isn’t close to being paid off. Is it good or will it be difficult to sell the amount you owe on the loan?
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The short answer is, yes, it’s okay—in fact, it’s normal. “People who are selling their homes have outstanding mortgages,” says Melissa Kuhn, regional vice president of William Ravis Mortgages in New York and Florida. “A mortgage does not interfere with the sale of the house, as long as there is enough equity to pay the full closing.”
Although a mortgage is technically a lien on your home, meaning that someone else (ie, your lender) has a claim on the property, it’s not usually considered a cloud on the title. This is an easily solved problem: when you complete a sale, settle the outstanding balance; This is often part of a round of Exchanged Funds that occurs during the closing. The lender allows the sale to proceed with the expectation that you will use the proceeds of the sale to repay the loan.
You can make equity is the key to selling a property that still has a mortgage on it: Basically, your home equity is the value of your home minus the mortgage balance. For example, if your home is worth $250,000 and you owe $100,000 on the mortgage, you have $150,000 in equity. This is the amount of money, minus your closing costs and expenses, that you will receive when your sale is completed (assuming you sell for the full value of $250,000).
Positive home equity is needed to be able to repay the loan using the proceeds from the sale. As long as you sell your home for more than the amount you owe on the mortgage, you can pay off your mortgage. You increase your equity by paying off your loan balance, but it can also be purchased to increase the value of your home, either through natural changes in the market or by implementing upgrades that increase its value.
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If you can afford it, a great way to increase your equity is to make the 13th annual mortgage payment and specify that it is applied to the principal. Pay off your mortgage faster by reducing the interest you pay on the balance.
Remember that when you sell, you have to pay closing costs, which can include broker fees and more. So if your equity is only positive, it won’t be enough. If you don’t have enough equity in your home to pay off the mortgage with the sale proceeds, you may need to use other funds—like savings—to make up the difference.
When you have negative equity, you may have difficulty selling a home with a mortgage. Also known as underwater or upside down, this means the home is worth less than you owe.
Imagine you bought a $300,000 home, put 20 percent down and took out a $240,000 loan. Unfortunately, the local real estate market picks up, and you find that you can only sell a home for $215,000. If you still owe $225,000 on your mortgage, you may not be able to sell your home at a price that allows you to collect the amount you still owe. They are below to water
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Generally, you must pay off any mortgage or loan on the home when you sell the property. You can list the property for sale and go through most of the process with the balance, but the loan must be paid off as part of the closing of the sale. Here are four steps you should follow when selling a home with a mortgage.
The first thing to do if you are thinking of selling a house that is still in arrears is to contact the lender and ask for a payment statement or letter. This document tells you how much you owe the lender when you sell. Since you make monthly payments, even with a fixed rate mortgage, the payment will vary from month to month. So be prepared to receive another statement after your closing date.
The payment statement contains instructions on how to send the final payment
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