Selling your home can be daunting if you've never done it before, and more so if you're worried about complications like having a second mortgage on the home. The good news is, having a second mortgage does not prevent you from selling the home and does not make any real difference to the home-selling process. Any second mortgage can be paid off during a home sale. The biggest impact a second mortgage has on the seller is the amount of profit they receive from the sale.
Look at the current appraised value of your home and the current amount owed on both mortgages combined. Consider what you can expect to get for the home and what you owe on the home and decide if the potential profit is enough for you to sell the home right now. The amount that is worth it to you, as a seller, varies based on your needs. For example, if you owe $50,000 on your first mortgage, and $20,000 on your second mortgage, and your home is worth $100,000, you are looking at a likely profit of $30,000 once you pay off both mortgages. If that amount will allow you to make a down payment on your next home, or pay off debts, this is a good decision for you. On the other hand, if in order to move to the next home or pay of your debts you need to net $50,000, this might not be the best time to sell.
Make sure you understand any early payment penalties that might be triggered by the sale of your home. This is especially likely if you are selling a home shortly after taking out the second mortgage or home equity line of credit. Factor these penalties into the total amount you owe on the home. Penalties generally consist of a percentage of the outstanding balance on the mortgage. For example, a common prepayment penalty will be 5 percent of the outstanding balance. Not all loans carry a prepayment penalty, of course. Read the fine print on your mortgage loan documents and ask your lender if you have questions.
Contact a real estate agent and list your home. Changes that can increase the appeal of your home and, therefore, the likely selling price can be made at this point. In some cases, simple changes like improving your landscaping can increase your home's selling price at a minimal out-of-pocket cost. Before you list the home, you should have all your mortgage paperwork in order, for both mortgages, to facilitate paying off the mortgages when the home sells.
Items you will need
- Mortgage documents
- Second mortgage documents
- Current home appraisal
- Make sure the lender for both mortgages are aware that you are selling the home. Both loans should show up in a title search. You must be able to prove that there are no existing liens on the home when you sell it to another party.
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