Can You Sell a House with a Mortgage? What You Need to Know

Selling a house is a big decision, and if you still have a mortgage on it, you might be wondering if it’s even possible. The good news? Yes, you can sell a house with a mortgage, and the process is quite common. However, there are some key things you need to know to ensure a smooth transaction.

In this guide, we’ll break everything down in simple terms, covering how selling a home with a mortgage works, what happens to your loan, financial considerations, and even what to do if you have a reverse mortgage. We’ll also tackle the five most common questions people ask about this topic.

How Does Selling a House with a Mortgage Work?

If you have a mortgage, your home is technically still owned by you—but the lender holds a lien on the property until you pay it off. When you sell, the proceeds from the sale go toward paying off your remaining mortgage balance. Here’s how it works step by step:

1. Determine Your Loan Payoff Amount

Before listing your home, contact your lender to get a mortgage payoff statement. This document provides an accurate balance of what you owe, including any accrued interest and potential fees for early repayment. It’s crucial to know this number to properly price your home and estimate your net proceeds.

2. Set a Competitive Sale Price

Research your home’s market value by looking at recent comparable sales in your area. Work with a real estate agent to determine a selling price that covers your mortgage balance, closing costs, and any additional fees. Setting the right price can attract buyers quickly and prevent your home from sitting on the market too long.

3. List Your Home and Find a Buyer

Once your home is on the market, negotiate with buyers to get the best possible deal. This may include staging your home, making minor repairs, and marketing it effectively. Once an offer is accepted, you’ll move into the closing process, where the financial details are finalized.

4. Pay Off Your Mortgage at Closing

At closing, the buyer’s funds will be used to pay off your mortgage. Your lender will receive the amount owed, and the lien on your home will be removed, allowing the buyer to take ownership. The closing process also involves signing paperwork, paying closing costs, and ensuring all financial obligations are met.

5. Keep the Profits or Cover a Shortfall

If your home sells for more than your mortgage balance, the extra money is yours to keep. However, if the sale price doesn’t cover your loan, you’ll need to pay the difference or negotiate a short sale with your lender, which can impact your credit score.

Can You Sell a House with a Reverse Mortgage?

Yes, you can sell a house with a reverse mortgage, but the process is a little different. Reverse mortgages are designed for homeowners aged 62 and older, allowing them to tap into their home equity without making monthly payments. Instead, the loan balance grows over time, and repayment is required when the homeowner sells, moves out, or passes away.

How Selling a House with a Reverse Mortgage Works:

1. Get a Loan Payoff Statement – Contact your lender to find out how much you owe, including interest and fees. Since interest accumulates over time, your balance may be significantly higher than when you took out the loan.
2. Sell the Home and Use Proceeds to Pay Off the Loan – If your home sells for more than your loan balance, you keep the remaining equity. If not, the lender is paid with the proceeds, and FHA insurance covers any remaining shortfall.
3. If You Owe More Than the Home’s Value – Reverse mortgages are non-recourse loans, meaning if your home sells for less than the balance owed, neither you nor your heirs have to pay the difference.

What If the Homeowner Passes Away?

If the homeowner dies, their heirs have 6–12 months to either sell the home and pay off the reverse mortgage or refinance it into their name. If the heirs choose not to keep the home, they can allow the lender to sell it to recover the loan balance.

Top 5 Common Questions About Selling a House with a Mortgage

1. Can I Sell My House Before Paying Off the Mortgage?

Yes, you can sell your house before paying off the mortgage. Your remaining balance will be deducted from the sale proceeds at closing. As long as your home’s value covers what you owe, you won’t have any issues. However, if you’re underwater on your mortgage (owe more than the home’s worth), you may need to pay the difference or pursue a short sale.

2. How Do I Find Out How Much I Owe on My Mortgage?

To get an accurate mortgage balance:

• Check Your Monthly Mortgage Statement – Your latest statement shows your estimated balance.
• Request a Mortgage Payoff Statement – Contact your lender to get the exact amount you’d need to pay off the loan, which includes interest up to a specific date.

3. What Happens to My Mortgage When I Sell My House?

• Your mortgage gets paid off first – The buyer’s payment will go directly to your lender to settle your remaining balance.
• Any remaining money is yours – After paying off the mortgage, closing costs, and any other fees, you keep the remaining equity.
• If you owe more than the home’s worth – You’ll need to cover the difference or work out a short sale agreement with your lender.

4. Do I Need to Inform My Lender Before Selling My Home?

No, you don’t need to inform your lender before listing your home. However, it’s smart to contact them early to get a payoff statement and discuss any potential early repayment fees or requirements. Some lenders might have conditions or clauses related to selling your home before full repayment.

5. What Happens If My Home’s Sale Price Is Lower Than My Mortgage Balance?

If you owe more than your home sells for, you have a few options:

• Cover the shortfall out of pocket – If you have savings, you can pay the remaining balance yourself.
• Negotiate a short sale – This requires lender approval, but they may allow you to sell for less than you owe.
• Consider renting instead – If selling isn’t ideal, you might rent your home out and wait for property values to rise.

Final Thoughts: Selling a House with a Mortgage Is Totally Doable

Selling a house with a mortgage is completely normal and happens all the time. The key is to know how much you owe, price your home strategically, and understand what happens to your loan during the process. Whether you’re selling with a traditional mortgage or a reverse mortgage, planning ahead will help ensure a smooth transaction.

If you’re considering selling your home and need help understanding your mortgage situation, reach out to a real estate agent or mortgage expert to guide you through the process!

Have more questions about selling your home with a mortgage? Drop them in the comments below!