What Happens To Your Mortgage When You Sell Your House?

1. What is a mortgage?

A mortgage is a loan that you take out when you buy a house. You borrow money from the bank, and in exchange, they provide you with enough money to purchase the home. The bank then takes a lien on the property, which means that they get to keep the house until you pay off your mortgage.

2. How does it work?

When you sell your house, you'll likely be servicing a mortgage at the same time. If you're using your cash to fund the sale, this won't be an issue. However, if you have a mortgage on the property that's about to sell, things get (a little) more complicated.

The process for selling a house with mortgage payments can vary from case to case, depending on how well your realtor and lawyer handle negotiations in advance. 

3.Mortgage life cycle

Over the years, as home prices increased, more and more people decided to buy a home. Then came the onslaught of subprime mortgages which gave many consumers access to money they once thought unattainable. The mortgage life cycle is a simple way to look at what happens when we buy a house, take out a mortgage, and pay it off over time.

4. What happens to my mortgage when I sell my house?

Most people are wondering what happens to my mortgage when I sell my house? Well, you will probably need to pay it off. The person who buys your home will become responsible for the remainder of your current loan. However, typically the amount of money left on your loan is well below its face value. This is simply because most people refinanced their existing mortgages within a few years of purchasing their homes.

If you are still paying the original total amount on your mortgage, it will be sold at auction to the highest bidder. In other words, if you bought your home for $250,000 and you owe $50,000 remaining on that mortgage, it will be sold to the person who bids the highest price for that mortgage. When you sell your house, the new homeowner will have to pay off that remaining $50,000 on their own.

5. The importance of understanding the process and your options before you make any decisions about your home loan

Virtually every home buyer assumes that they have to contact their bank and arrange to pay off the loan if they sell their home. The reality is far different. It is crucial to confirm how you will do this before you ever put an offer on a house because many things can affect your ability to get out of a mortgage as cleanly as possible. A mortgage company like altrua.ca might be able to help you out with these important questions, as well as getting your next mortgage done assuming you are moving to another home!

6. What are some things to consider when deciding whether or not to keep or refinance your mortgage after selling your home?

There are some things to consider before deciding whether or not to refinance your mortgage after selling your home. One important consideration is whether you should keep, refinance and stay put in your new home or sell the new house and move into a more affordable place. If you decide to re-up with the lender on your primary residence and get a fixed-rate loan, make sure both interest rates (the one on the old loan and the new one on the new/current house) are at about the same level, so you're paying about the same monthly payment each month.

You'll also want to think carefully about how long you plan to live in this current home because any money you borrow for a mortgage refinance doesn't disappear when you sell the house. It remains a liability on your balance sheet until you pay it off. If rates continue to go up in a rising interest rate environment, you'll end up paying more than your original loan amount over time -- especially if there's negative amortization. For more information, you can ask our home buyers at SnapCashOffers.com for more information on how to sell your house.