A real estate transaction can be an exciting time for both the buyer and seller. The buyer gets a home that they can call their own, and the seller might make some money on the sale and clear debt. If you own a home that has a mortgage, it is possible to sell the home even though you owe the bank. Typically, you can't sell something that isn't yours, but to sell a house with a mortgage, you have to pay off the loan the same day that you close on the sale of the house. The lender will release the title and anything extra is money in your pocket.
Contact your lender and ask for the payoff amount on your mortgage. The bank will provide you with the amount you owe on your mortgage, which is generally good for 10 to 30 days. After the payoff expires, the bank imposes additional interest and you'll have to call and request a new payoff amount.
Hire a title company to assist with the loan transactions if your lender doesn't assign one automatically. Title companies handle the money between the buyer and seller. A title agent will receive the money from the buyer, pay off your existing mortgage, remove the lien on the title and transfer the title to the new owner. Provide the agent with your mortgage payoff amount and account number before closing.
Show up at the closing and sign all of the documents to release the property, which should include the deed and settlement statement. The settlement statement will explain information about the buyer's mortgage and your payoff amount. Make sure that the payoff amount listed on the settlement statement matches the amount quoted by your lender. After all of the documents are signed, the title agent will record the deed at the county recorders' office and send payment to your mortgage company by wire transfer.
- If there's any money left over after your mortgage is paid, depending on the time of closing and the title company's procedure, you might receive the money within a few days, if not immediately at closing.
- Closing procedures differ from state to state.
- If you can come up with enough money to pay off your mortgage before selling your home, you can consider that option. Unless your lender charges a prepayment penalty, paying off your home early can save you interest and other fees associated with paying off a mortgage at the time of closing.
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