A mortgage is a long term commitment. Most mortgages last for 15 to 20 years or more, depending on the contract terms. They are taken out by homeowners who plan to be in their home for a good portion of their adult years.
There may be reasons why a person or family decides to sell their home before their mortgage has expired. Sometimes they may need to move to be closer to family or relocate for a new job. Other times it may be a financial necessity. Still others may just need a change of pace in their lives and make a new start somewhere else.
Selling a home in Texas that already has an active mortgage can require a little more effort, but it can be done in most cases. Here are a few things to do if you’re in this kind of situation:
1. Talk to your mortgage lender.
The first thing you should do is discuss your intentions with your mortgage lender.They should give you a quote for the amount that would pay off the existing mortgage. Such quotes usually last for up to 30 days.
They include interest to that day and may also include any closing fees that you would be responsible for upon the sale of the property.
2. Review your loan documents.
Next, take the time to review your loan documents carefully. You’ll want to see if there are any prepayment penalties for paying the mortgage off early. Such penalties or fees can vary depending on the lender and length of the mortgage.
3. Determine your asking price.
Now it’s time to set the asking price for your home. The price you establish should be reasonable according to current market conditions. It shouldn’t vary too much from the asking prices for other similar homes in your area.
Take into consideration any closing costs, and expenses when determining your asking price. The amount you receive should be enough to pay off the existing mortgage in full.
There may be enough left over for you to either set aside for the future or to make a down payment on another property that you may want to buy.
4. Get a statement for your estimated settlement.
They should open an escrow account for you. After the escrow has been opened, your title agent or escrow agent should be able to tell you what your anticipated closing costs should be.
The amount can vary if you negotiate with the home buyer for a different sale amount, but this estimate should give you a good idea of how much you can expect to receive after the closing process has been completed. Some settlement statements may require the last mortgage payment to be paid when the sale closes.
5. Don’t go underwater!
Most home sellers leave the sale having built positive equity.
If this happens to you, there are a few courses of action that you can take:
1. Look for a short sale. If you need to sell your home quickly, you may want to consider a short sale. In short sales, the lender lowers the remaining balance left on the mortgage so that the home can be sold in a timely manner. You may have to plead your case to the lender or show that the alternative would be a hardship for you before the lender will agree to such an arrangement.
2. Pay the difference. Another alternative is to pay the difference between the asking price and the remaining mortgage balance yourself. This might mean having to take out another loan or dip into your savings, but the end result could help you sell your home faster. However, if you can’t afford this additional expense, it’s best not to consider this option.
3. Take your home off the market or postpone the sale. If you can’t make ends meet financially or you’re trying to sell your home in an economic downturn, it might be best to delay the sale or take your home off of the market altogether. You may just have to wait for conditions to improve, or continue to make mortgage payments until more equity is created. Another idea is to rent out rooms of your home to generate some additional income.
Talk to your lender or realtor if you have questions or concerns during this process. Stay on top of your budget, and make any required mortgage payments on time or even ahead of time if possible. You could be subject to late fees and other charges if you miss any payments before the home closes.
There may even be situations where you can sell your home and still come out ahead, even if you have a mortgage. This isn’t a guarantee, but it can happen depending on the value of the home, the remaining balance of the mortgage and any remaining costs or fees you may have to pay for before the closing is completed. Plan carefully, and you’ll be able to sell your home and set some money aside for your next opportunity.