Selling a House with a Mortgage

Plenty of people sell up and move on before they’ve paid off their mortgage. Except for those lucky enough to own their house outright or those who choose to stay in their first home for life, selling a house before the mortgage term is up will be something all homeowners have to manage at some point.

In this guide, we’ll walk you through what to expect and offer some helpful tips on buying and selling a house at the same time.

Can I Sell a House Before the Mortgage Term Ends?

Absolutely. As long as you can afford to pay off the remaining balance of the mortgage, you can sell your home at any time. Alternatively, you can transfer your existing mortgage to a new property.

If you’re selling to free up some cash and have no plans to buy another property immediately, make sure that the sale price is higher than the outstanding mortgage balance. This should include any fees you are liable to pay, such as early repayment charges. When property prices are low, negative equity (when your house is worth less than the outstanding balance on the mortgage) may be an issue, although this is fairly rare.

Will I Have to Pay Early Repayment Charges?

Contact your mortgage lender to determine if you are still within the period when early repayment charges apply. The only way to avoid paying these fees is to wait until your mortgage deal ends. Most people sign up for a fixed term of three to five years, after which early repayment charges will not apply.

If you can get a better deal with a new mortgage provider, the savings you make could outweigh the cost of paying the early repayment charges. It’s worth contacting an independent adviser to help you identify the best offers. Many offer free mortgage advice to homeowners and take their fees from the lenders their clients sign up with.

Selling a House and Keeping the Mortgage

You can sell your house and keep the mortgage – provided you are using the mortgage to buy another property. This is called ‘porting’ your mortgage and is possible in most situations, but this will depend on your income, age, employment status and the type of property being sold; for details about your particular mortgage, you should speak to your lender.

When selling a house and keeping the mortgage, the money from the sale of your old property pays off the mortgage and the lender will set up a new loan for the new property using the same terms as before.

Porting a Mortgage: Explained

An alternative to clearing your mortgage debt when selling a house is to port the loan to your new property.

Porting a mortgage loan means transferring your existing deal to another house. Porting can save a lot of money if you have a favourable fixed rate or are still within the early repayment charge window. It’s also much less hassle than starting a completely new application with a different mortgage company.

However, if you’re selling to buy a more expensive property, porting could mean that you need two mortgages — your existing one and a second to cover the price difference between the two properties.

To port a mortgage from one property to another, you must complete a simple application process. This is because the terms and conditions of the mortgage are transferred, not the loan itself. There is generally no fee for porting a mortgage if you are not increasing or decreasing the loan amount.

Most, but not all mortgages are portable. Your personal circumstances and those of your property will determine if you are eligible for mortgage porting.

Selling a House with a Reverse Mortgage

A reverse mortgage is a bit different compared to your standard mortgage. Instead of making monthly payments to a lender, the lender actually pays you. It’s a way for homeowners (usually older owners) to tap into the equity in their home and get a lump sum or regular payments. The loan is typically repaid when the homeowner moves out, sells the home or passes away, rather than on a monthly basis.

How Does Selling Work with a Reverse Mortgage?

If you sell a home with a reverse mortgage, the money from the sale is first used to pay off the reverse mortgage balance. This includes the original loan amount, plus any interest that’s piled up over the years – you don’t pay it off over time, so interest will have built up!

Once that’s squared away, any remaining money is yours. So, if your home has appreciated in value, you could walk away with a nice chunk of change. However, even if the house sells for less than you owe on the reverse mortgage, there’s no need to panic. Most reverse mortgages are “non-recourse,” which means you (or your estate) won’t owe more than the home is worth. The lender takes the loss, not you.

Selling a home with a reverse mortgage doesn’t have to be any harder than selling one with a regular mortgage. The key is knowing what you owe, planning ahead and working closely with your lender. With the right advice and a bit of patience, you’ll be able to make the process smooth and stress-free.

How to Buy a House Before Selling Yours

If you need a mortgage to buy a new property and yours has yet to sell, neither getting a new loan nor porting your existing one will be a plausible option. The majority of homeowners do not have the borrowing power to have two mortgages simultaneously. So, how can you avoid losing your dream home if your house won’t sellor the buyer pulls out at the last minute?

There are several ways to sell your house fast.

Modern auctions are increasingly popular. Buyers must exchange and complete within 56 days of the hammer falling. However, selling this way is a minefield for beginners and you could achieve a lot less than the on-market asking price – or fail to sell at all.

You could take out a bridging loan to help you buy the new property. This is a short-term loan — typically around a year — that “bridges” the financial gap between selling one property and buying another.

Or sell to a cash house buyer. A genuine cash buyer will have the funds to buy your property within as little as seven days. The sale price will be below market value, but you will avoid many typical costs involved in selling a house.

My experience with House Buyer Bureau was everything I’d hoped it would be, having read some of
their online reviews, that’s to say it was excellent. Communication was super efficient, polite, and
friendly. Suzanne was lovely. She was very helpful and very understanding of my situation, and at no
point did I feel under pressure. I’m very impressed with the company.

 

Selling a House with a Mortgage FAQs

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