March 6, 2023

Can You Sell a House with a Mortgage?

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Yes, selling a house with a mortgage is extremely common. If you're interested in a cash offer with no repairs and no fees, fill out the form below. We'll get started on your FREE cash offer today!

Can You Sell a House With a Mortgage?

According to the National Association of Realtors (NAR), homeowners usually stay in a home for eight years before they decide to move or buy another property. Given that mortgages are usually 15 or 30 years to pay, NAR's data suggests that homeowners move even before they settle their remaining balance. But is this possible? Can you sell a house before its mortgage is paid off?

Selling a house before its existing mortgage is paid off is pretty common. You can work with a real estate agent or get a cash offer if you want a faster sale. Usually, the proceeds of the home sale are used to pay off the loan. If the house has enough equity, you may still take home a portion of the sale even after satisfying your mortgage debt.

Interested to learn more about selling your home with a mortgage? Check out the rest of this article! Up ahead are detailed instructions on how to sell your home, as well as answers to the most common questions about selling a property with a mortgage.

Can You Sell A House Before Paying It Off?

Yes. You can sell a house with an outstanding mortgage balance and use the sales proceeds to pay off the loan balance

However, this is only possible if your house has enough equity. If it doesn't and you are underwater, you still have to cover the difference between the sales and the outstanding mortgage balance. You'll also have to pay for the closing costs. This means you won't be able to take home anything after the sale.

What Happens to Your Mortgage When You Sell Your Home?

What Happens to Your Mortgage When You Sell Your Home?

Selling your home with an existing mortgage won't magically clear your debt. If you are curious as to what happens to your mortgage when you put your house on sale, the answer is quite simple.

You have to pay your remaining mortgage balance in full once your house is sold. Depending on the terms of the loan, you might find yourself paying an early payment penalty or prepayment penalty, too. This is usually charged when you pay your outstanding mortgage balance ahead of schedule.

Although the Dodd-Frank Act prohibits the collection of prepayment fees, some mortgages are exempted from the rule.

What to Do Before Selling a House With a Mortgage

Before you sell a house with a mortgage, there are three crucial actions you have to take to ensure that the proceeds of the sale are enough to pay off the loan and provide you with some take-home cash.

Contact Your Mortgage Lender to Determine the Remaining Loan Balance

What to Do Before Selling a House with a Mortgage

Your lender is required to provide you with a copy of the payoff statement or payoff quote, according to the Consumer Financial Protection Bureau.

This statement includes the amount you need to pay in full to satisfy the mortgage loan balance, instructions on how to submit your payment, penalties for any late payments, etc.

Typically, the payoff amount of your existing mortgage includes the accrued interest you owe until you pay the loan balance. When the sale closes, your escrow company will ask your mortgage lender to issue another payoff statement with an updated payout amount.

Asking for a copy of the payoff statement is essential so you know what portion of the home sale would go to paying your debt. Knowing this can affect your decision to sell your house and also buy a new home. 

Find Out How Much Your Home is Worth

Can You Sell A House Before Paying it Off?

After you learn about the payoff amount of your mortgage, you also need to estimate the value of your home

There are many online tools that can help you do this-- they are based on an Automated Valuation Model (AVM). For a more accurate home value estimate, however, you can ask a professional to conduct a CMA or comparative market analysis.

A CMA analyzes your home value based on comparable homes in your area that are recently sold. 

Estimate the Net Proceeds

Once you know the payoff amount and the market value of your home, you can then proceed to calculate your estimated net proceeds when you sell your home.

Whether or not the home sale will gain you profit will depend on your home's equity. This will also help you set a fair listing price


Equity is the financial stake in your property. It's the amount you'll earn when you sell your home. This increases depending on various factors, but generally, it can grow through home investment and ROI from upgrades.

  • Home Investment Equity: This is the equity you gain from your financial investment in your home. This may include your down payment when you bought the property, mortgage payments you made each month, and the cost of upgrades you made to the house.
  • Earned Equity: This equity is brought about by market conditions. For example, when the home value in the local real estate market increases and your property appreciates. This may also be the result of extra upgrades you've done to the property in order to gain ROI.

Again, if your house has enough equity, it is possible that after paying off the home loan balance, you'll still get some money to take home. But if it doesn't have enough equity, you may be at a loss.

In calculating your possible net proceeds or equity, you have to deduct the mortgage payoff amount, approximate closing costs, and agent commission from the market value of your home. This is if you go the traditional route. 

If you opt to sell to a cash buyer, you won't need to deduct agent commissions since you won't need an agent in the first place. Also, cash buyers cover closing costs. You'll learn more about this in the succeeding section.

How Do You Sell a House With a Mortgage?

There are two main ways to sell your house if you owe money due to an existing mortgage— get a cash offer or sell with the help of real estate agents. This portion of the article details the process of selling through these two options to help you decide which suits your goals better.

Get a Cash Offer

How Do You Sell a House With a Mortgage?

Getting a cash offer from a real estate investor or a cash buyer is perhaps the fastest way to sell your house with an outstanding mortgage balance. Since cash buyers eliminate lenders from the equation, the sale could close in as fast as seven days.

Selling your house to a cash buyer also means you won't have to ask for the help of a real estate agent. In other words, you'll save on commission fees and skip the open houses. What's more, cash buyers cover closing costs and other fees connected to the home sale, so you receive the exact amount they offer after subtracting your remaining mortgage balance.

If you are interested in getting a cash offer, here's the simple process you have to go through:

Request an Offer

First off, you have to request an offer from the cash buyer or investor. You may do this by calling them or filling out a form on their website. Note that when asking for a cash offer, you should disclose that your house still has an unsettled mortgage.

Expect a Home Visit

After requesting an offer, most cash buyers schedule a visit to the property. This is to check the current state of the house (if it needs repairs, etc.) and set an accurate offer. This is similar to when real estate agents do a CMA to come up with a fair listing price but without the follow up showings and open houses. Once the investor finishes the walkthrough, expect that they'll give you an offer within 24 hours.

Review and Sign the Contract

If you are happy with the offer, you can accept the cash buyer's offer by signing the contract via email. You have to review and sign the contract to confirm you agree with the terms. This will make the home sale official.

Proceed to Closing and Pay Off the Mortgage Lender

After signing the contract, a closing date that you choose will be set. Usually, cash buyers are more lenient about the moving-out date. You can communicate your preferred move-out date to the cash buyer. It may span from days to weeks.

Once closing is set, a title search will be conducted and other possible issues preventing the sale will be addressed. 

At the closing table, the cash buyer would pay for the closing fees. A representative of the lender may be present during the closing to collect the full payment for the remaining mortgage balance. The remaining funds would then be your take-home money.

Sell with the Help of a Real Estate Agent

Sell with the Help of a Real Estate Agent

The other route you can take when selling a home with a mortgage is to sell with the help of real estate agents. Since this sale process is traditional, expect it to be longer and more expensive.

Determine the Right Time of Year for Selling Your Home

Most homeowners sell traditionally to gain as much money as possible from the property. But for this to happen, they should determine the right time to sell. For instance, it might not be a good idea to sell during winter as the market isn't as hot. 

Repair and Price Your Home

Aside from this, the home's sale price should be enticing in order to gain the attention of potential buyers. The property should also be staged for sale— the house should be given a fresh coat of paint and all the damages should be repaired. After which, the property should be marketed and open houses and viewings should be scheduled.

Find a Buyer

It can take months to years to reach the closing table in a traditional home sale, which means the seller would still have to pay monthly mortgage payments until the house is sold on top of the selling expenses. Not everyone has the luxury of affording all of the holding costs.

Pay Fees at Closing

Unlike a cash sale, the seller will need to pay 6 percent for real estate agent commission on top of closing costs. The remaining mortgage balance will then be subtracted. The money left would be the take-home profit of the home seller.

Frequently Asked Questions About Selling a Home With a Mortgage

Can You Sell a Mortgage Property with Negative Equity?

Can You Sell a Mortgage Property with Negative Equity?

Negative equity means that the money you owe is more than the worth of your home. You can sell your mortgage property with negative equity, but you have to pay off the difference between the remaining mortgage balance and the sale proceeds with your savings.

If you don't have enough money to settle the difference, it makes more sense to hold onto the property for the meantime until it has appreciated value. This way, the proceeds of the home sale can completely cover the mortgage and get you some cash after.

Short Sale

It is possible that time is of the essence and you cannot wait for the local real estate market to improve. In this case, you may want to consider a short sale.

A short sale occurs when your mortgage lender agrees to be paid less money than what you owe. In other words, you have to convince them to approve the sale and accept that this option can hurt your credit record.

Generally, short sales can affect your mortgage options in the future for a certain period of time. But this is better than losing your house to foreclosure if viewed from a financial perspective.

Do You Still Have to Pay the Mortgage While the House is on Sale?

Yes. You still have to settle your monthly mortgage payments while you are preparing your house for sale or while it is currently listed to avoid the accumulation of more interest.

Putting your house on sale won't stop the mortgage company from asking you for payments. It's only until you pay off your full mortgage that your monthly payment stops.

How Soon Can You Sell a Mortgage Property You Just Bought?

You can sell your home with a mortgage at any time, except when it is already being auctioned due to foreclosure. If you want to sell after a week of settling into your new home, it is permitted. However, don't expect that your property has already appreciated in value within that short period. 

In cases when you don't really have a choice but to sell your property due to a relocation or divorce, you may want to sell to a cash buyer to fast-track the process. These potential buyers close in just a few weeks.

Do You Need to Sell a House With a Mortgage via a Real Estate Agent?

No, you don't need a real estate agent when selling a house with a mortgage. If you opt for a cash offer, you'll be transacting directly with the buyer. In other words, you don't need to be represented by a real estate agent, and you won't have to pay agent commissions.

Of course, if you aren't comfortable selling a house without an agent, you can hire one to guide you through the sales process.

Would You Still Pay Closing Costs When You Sell Your House With an Existing Mortgage?

Would You Still Pay Closing Costs When You Sell Your House with an Existing Mortgage?

If you sell your house with a mortgage through a cash buyer, you won't have to pay closing costs since they typically cover that. Meanwhile, if you sell traditionally with a real estate agent, you would need to pay closing costs which can include:

  • Settlement or Closing Fee to Title Company: This is a fee to the title company to pay for all administrative costs of the closing.
  • Notary Fee: This is required if you did a virtual closing where a notary comes to you for signing the closing documents.
  • Real Estate Agent Commission: Typically, the commission fee the seller has to pay at closing is 6% of the total home sale. This is split between your listing agent and your buyer's agent.
  • Owner's Title Policy: To show good faith, the home seller typically pays for this policy even though the buyer would be the one who'll benefit. The owner's title policy protects the buyer from possible legal claims to the property in the future.

Aside from the ones mentioned above, closing costs for a traditional sale may also include fees for a title search conducted by the title company, home inspection, appraisal, survey, credit report, attorney fee, recording fee, transfer taxes, etc. 

What Will Happen When You Sell a Mortgage Property With a Home Equity Line of Credit (HELOC)?

Many homeowners take out a HELOC to pay for some expenses of homeownership. The HELOC is paid at the same time you pay off your mortgage after the sale.

To put it simply, if a mortgage property is also attached to a HELOC, both your mortgage and HELOC loan balance would be settled before you take home what's left of the sale.

Can You Have Two Mortgages at the Same Time?

Can You Have Two Mortgages at the Same Time?

Whether or not you can have two mortgages at once depends on your income and financial goals.

Typically, lenders consider your debt-to-income ratio or DTI if they will grant you another mortgage. DTI compares your gross monthly debt payment to your monthly income and should ideally be 45% or lower for you to be allowed a second mortgage.

Note that this 45% debt should combine all your loans, including credit card debt, car loan payments, etc. 

Can You Sell a Home With a Mortgage and Buy a New One?

The majority of home sellers are trying to sell a home and buy another at the same time. This is not uncommon. However, what happens to the mortgage depends on which real estate transaction reaches closing first.

When You Sell First

When you are able to finish selling your home before you purchase another, you won't have to deal with double mortgages; therefore, there are fewer complications.

You receive the proceeds of the sale, payoff your old mortgage, and use what's left for the downpayment of a new home. Usually, the proceeds are large enough so you can afford to pay a large down payment to avoid private mortgage insurance.

When You Buy First

If you are buying a new home and the sale of your old home has yet to close, chances are, you need to pay the down payment through your savings.

This is also the case if the proceeds of the home sale only cover the mortgage payoff and there's no money left for you to take home.

To facilitate buying a home when the sale of your previous property hasn't reached closing, here are some suggestions:

  • HELOC: HELOC is a line of credit that is secured by your previous home's equity. If your old house is not yet on the market, you can get a HELOC loan and use it as a downpayment for a new home.
  • Contingent Sale: You may want to put a contingent offer on the property you mean to buy if the seller permits. This means your purchase of a new home won't close until you sell your last home.
  • Bridge Loan: Even though this can be a huge financial burden, many homeowners find themselves taking out a bridge loan. This is a temporary loan you can use as a downpayment; however, you have to pay it monthly or according to the terms of the lender. This means that while waiting for your home to sell and buying a new one, you will make payments for this loan as well as your existing mortgage.

What Happens to the Mortgage Lender Escrow Money When You Sell?

Typically a buyer will put a percentage of their offer into escrow to show they are serious about purchasing your home. If the sale falls through, the seller gets to keep this money. If the sale closes, the buyer pays the offer amount minus what they already put into escrow. Either way, the escrow funds will be released to the seller.

Can the Proceeds of a Mortgage Property Sale be Used as Down Payment for Another House?

Can the Proceeds of a Mortgage Property Sale be Used as Down Payment for Another House?

The answer to this would depend on how much you owe the lender. If the proceeds of the sale are enough to pay off the mortgage and provide you with cash to take home, then you can definitely pay for a down payment for a new home. 

However, if you owe your lender more than what you are receiving in proceeds, you won't have any money leftover for the down payment.

The amount you receive in your bank account is only what's left after the mortgage company is paid (along with the title company and real estate agents if you chose the traditional sale route).

Final Thoughts: Can You Sell a House with a Mortgage?

Selling your house with a mortgage is incredibly common. In fact, most homeowners do this in order to pay off their loans and settle the downpayment of another property.

It is, however, crucial that a homeowner calculate their net proceeds after the sale to determine whether selling the house with a mortgage is a good idea. It's important to make sure there is enough equity built up and to still earn money after paying their debt.

If you are looking into selling your house with a mortgage, don't hesitate to contact us at Sell My House Fast. We'll give you a fair offer so you can settle your mortgage and move on to a new home.

Fill out our form below or call us at (844) 207-0788 to learn more about selling your house with a mortgage.

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Author: Andy Kolodgie

Andy Kolodgie is an experienced real estate investor with a network that expands nationwide. As owner of Sell My House Fast, Andy’s goal is to provide home sellers with more options to their real estate problems than a traditional home sale. 

He’s been featured on multiple publications including Amazon, Yahoo Finance, MSN, HomeLight,, Apartment Therapy,, LegalZoom, Zolo, and

Sell My House Fast has been a cash home buying company since 1999. We buy houses nationwide! At Sell My House Fast, we offer cash for houses and connect sellers with local buyers. If you want to sell your house for cash, fill out our short form to get fair all cash offers for your house!

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