Selling a home with an existing mortgage is very common—and completely possible. In fact, most homeowners still owe money on their mortgage when they decide to sell. Whether you’re relocating, upgrading, downsizing, or just moving on, understanding how the process works will help you avoid financial pitfalls and make smarter decisions.
This guide breaks down the process of selling a home with a mortgage, step by step, including what to expect, what to prepare for, and how to handle the financial aspects smoothly.
Step 1: Understand Your Mortgage Balance
Before you do anything else, contact your lender to find out exactly how much you still owe on your mortgage. This is known as your mortgage payoff amount.
Why It Matters:
- It helps you determine how much equity you have in your home (home value minus what you owe).
- It gives you a realistic idea of your net proceeds after the sale.
Tip: Ask for a “payoff statement,” which includes the total amount due, including interest and any fees, on a specific date.
Step 2: Estimate Your Home’s Market Value
You need to know how much your home is worth in today’s market. This will determine if you can sell for enough to pay off your mortgage and cover closing costs.
How to Do It:
- Hire a real estate agent to provide a comparative market analysis (CMA).
- Look at similar homes recently sold in your neighborhood.
- Consider getting a professional appraisal for accuracy.
Equity Example:
If your home is worth $350,000 and you owe $250,000, you have about $100,000 in equity (before closing costs and fees).
Step 3: Budget for Selling Costs
Selling a home with a mortgage involves expenses you must plan for.
Common Costs Include:
- Real estate agent commission (typically 5–6% of the sale price)
- Closing costs (1–3% of the sale price)
- Mortgage payoff
- Repairs or staging costs
- Moving expenses
Example:
If you sell for $350,000 and pay 6% commission ($21,000), $250,000 for your mortgage, and $7,000 in closing costs, you’d walk away with roughly $72,000 in profit—assuming no other major expenses.
Step 4: Hire a Skilled Real Estate Agent
An experienced agent can guide you through pricing, listing, showing, negotiating, and closing—all while keeping your mortgage details in mind.
What to Look For:
- Experience with selling homes with mortgages
- Strong negotiation skills
- Local market expertise
- Clear communication about timelines and net proceeds
Step 5: List and Market Your Home
Once you’re ready, list your home on the market. Your agent will handle the marketing and showing process, but you should:
- Keep the home clean and staged
- Be flexible with showing times
- Make minor upgrades or repairs to boost value
Step 6: Accept an Offer and Enter Escrow
Once you accept a buyer’s offer, the transaction enters escrow (a neutral third party that handles funds and paperwork). During this time:
- The buyer conducts inspections and secures financing.
- You continue paying your mortgage until the closing date.
Step 7: Pay Off the Mortgage at Closing
At the closing table:
- The buyer’s lender transfers funds to the escrow company.
- Your mortgage is paid off directly from the sale proceeds.
- You receive whatever’s left (your equity) after all fees are deducted.
Important Notes:
- If your home sells for more than your mortgage, the leftover is your net profit.
- If your home sells for less than what you owe, you may face a short sale (see below).
What If You Owe More Than Your Home Is Worth?
This situation is called negative equity or being “underwater” on your mortgage. If you can’t cover the mortgage with the sale price, you have two main options:
1. Short Sale
- You ask the lender to accept less than what’s owed.
- The lender must approve the buyer’s offer.
- It affects your credit score but is better than foreclosure.
2. Bring Money to Closing
- If you’re close to breaking even, you can pay the difference out of pocket.
Can You Buy a New Home While Selling the Old One?
Yes, but it requires careful timing. You can:
- Use a contingency offer: Buy a new home only if your current home sells.
- Bridge loan: A short-term loan to help finance your next home before closing.
- Rent back option: Negotiate to stay in your sold home for a few weeks to allow time to move.
What Happens to Your Monthly Payments During the Sale?
Keep making your mortgage payments as usual until the sale is finalized. Missing payments can damage your credit and delay the sale.
Tips to Sell a Mortgaged Home Smoothly
- Know your payoff amount early.
- Price your home right—overpricing delays offers and can increase holding costs.
- Disclose your mortgage details to your agent and escrow officer early.
- Avoid taking out new loans while you’re selling, especially if you plan to buy again.
- Stay calm—the process can be stressful, but proper planning pays off.
Frequently Asked Questions (FAQs)
Q: Can I sell my house if I have a mortgage?
A: Yes. Most homes sold today still have a mortgage. The mortgage will be paid off at closing using the buyer’s funds.
Q: Will I make a profit if I still have a mortgage?
A: That depends on your home’s current value, how much you owe, and the costs of selling.
Q: Can I use the proceeds from my sale as a down payment on my next home?
A: Absolutely. Many homeowners use their equity to buy their next property.
Q: What if I’m behind on my mortgage payments?
A: Talk to your lender and your real estate agent. You might qualify for a short sale or other relief options.
Q: Does selling a home with a mortgage take longer?
A: Not necessarily. The timeline is similar to a traditional sale, but staying organized helps avoid delays.
Final Thoughts
Selling a home with a mortgage is entirely manageable—as long as you understand your financial position and plan carefully. With the right guidance and a solid strategy, you can sell your home smoothly, pay off your loan, and move forward with confidence.
Whether you’re upgrading to a bigger space, relocating for work, or starting a new chapter, make sure your financial foundation is strong. By knowing your numbers, avoiding surprises, and working with professionals, you’ll turn your home sale into a smart financial move—not just a change of address.
