Life changes faster than most homeowners can pay off their mortgage. As such, it’s not uncommon for many homeowners to sell a home that still has a mortgage. Since you’ve signed legal paperwork with the bank that says you’ll pay them for the home, what happens when you sell?
What Happens to a Mortgage Loan if You Sell Your Home for Profit
The ideal scenario for a home sale is for you to bring in more for your home than you actually owe on your mortgage. If the real estate market has been stable, and if you have been making your mortgage payments on time for years, you should have equity in the home. Assuming you’ve kept your home in good condition, you will be able to sell your property successfully and will even have enough money left for at least a down payment on a new home. The mortgage on the first home is paid off, and if needed, you get another mortgage for your new home.
However, your situation will be more complex if you are not able to pay off your loan completely.
What Happens If You Are Not Able to Pay Off Your Loan?
There may be a situation when the price of your property is not high enough to pay off the mortgage. That means that you owe more than your property is worth. In this case, your home purchase loan is considered to be “underwater.” Selling a property with an underwater loan is complicated, and the traditional sale is not the best decision. However, there are other options you can consider. Here are two.
A short sale, also known as a preforeclosure sale, is an option when a property is sold for less than the remaining balance on the mortgage. If you think this is the best solution for you, the first thing you should do is to write a hardship letter to your mortgage lender, in which you will explain why you are not able to pay off your mortgage completely. Supportive documentation is also required, including pay stubs and tax returns. If your mortgage lender approves your application, your property will be listed as a short sale. All offers will be forwarded to the lender, who will accept, reject, or counter them. When the property is sold, there are two possible scenarios: the first, the lender forgives the difference; and the second, they get a deficiency judgment against a homeowner.
Selling Property to a Cash Buyer or Home Investor
Homeowners who have a mortgage problem often choose this option because it is an effective and quick solution. Moreover, it is a great option for those who want to sell their home fast and with no hassle. The sale can be closed in just a few days. Cash buyers are ready to purchase your property immediately, regardless of its condition and location, and they do not require you to clean it or make any renovations or repairs. One more advantage is that home investors pay cash. If this amount doesn’t cover the mortgage, you’ll need to work with your lender to create a plan that’s mutually beneficial. If you want to sell your property with a mortgage in Tulsa and want to do it as fast as possible, We Buy Houses Tulsa is ready to help you. We are ready to buy your home immediately, and its location or condition does not matter. If you have any questions, feel free to visit our website and fill out our form, or give us a call at 918-739-6777. Our experienced agents are here for you.