Things change, and when we talk about mortgage terms, most of us are looking at at least a 15- to 30-year commitment. You can’t say for sure that you won’t have to move within that time frame. So, the answer to whether or not you can sell a house with a mortgage probably won’t come as much of a surprise.
Can I Sell A House With A Mortgage Before The Term Ends?
Yes, you definitely can sell a house with a mortgage before the term ends, as long as you can pay for it. This means that the amount you still owe on the loan must be less than what your home is worth. On top of that, you’ll also need to think about any charges for paying off the loan early and any fees you may have to pay to brokers or financial advisors you hire.
As always, it’s very important to do the maths before getting involved. Find your mortgage terms and see if you are still in a period where there are fees for paying off the loan early. Also, find out how much it will cost to pay off your mortgage in full. Keep in mind that this is different from the annual early repayment allowance that lenders give customers who want to overpay their mortgage. This is usually around 10% of the remaining balance each year.
If you are still within the terms of a deal, you may have to pay a fee of 3 to 5% of the amount you still owe to settle up in full.
Do I Need To Let My Lender Know?
Yes, without a doubt. Obviously, you won’t need to do this until you’re sure you want to sell your house with a mortgage, but this is still a call you need to make. Not only will they need to know that a sale may be coming up, but it will also give you a chance to talk about your options, like moving your mortgage (more on this in a bit).
What Happens To My Mortgage?
Most of the time, the money from your sale will be used to pay off (redeem) the loan and any fees you may have owed for paying it off early.
Your conveyancer will ask your mortgage company for a redemption statement and handle the settlement for you. This will end the mortgage deal, giving you the freedom to live without a mortgage or get a new one with the same lender or a different one.
But this isn’t the only way to do it. For some, it makes more sense to keep the mortgage they already have.
Can I Move My Existing Mortgage?
Yes, you can. This is called “porting.” Even though it doesn’t happen as often as redemption, it’s not that rare. Most mortgages can be moved from one house to another when selling a house with a mortgage, and if the conditions are right, you could save a lot of money by doing this.
Porting a mortgage isn’t as easy as just giving your lender a quick call and asking them to change your address. In reality, the process for porting a mortgage is very similar to the process for getting a new mortgage or switching lenders. You will have to reapply and have your finances reevaluated before being accepted. Your new home will also be given an appraisal (which you may have to pay for).
If you are accepted, however, you will keep the same terms as your current deal, including the interest rate you pay now. This can be a good idea, especially when times are uncertain or when interest rates are going up.