Hello, can someone explain to me in basic terms how people sell their homes while still owing on the mortgage? I understand the sale covers the remaining mortgage but you still have lawyer fees and closing costs of the new place and how do you time it so you aren’t homeless in between? And is it even worth it with the market in the toilet the way it is? I know people do it all the time but I just don’t understand how it works
House selling while still in mortgage?
byu/UncleDhraff inRealEstate
Posted by UncleDhraff
6 Comments
Oh you sweet summer child. Let’s say you owe $95k on a home. You sell the home for $105k, buyer sends the money, you pay off bank for $95k and pocket $10k.
Your next home is completely separate from this process. You either have something in line or you don’t.
Now if you want to sell it but can only get $90k, then you’re “underwater” and this transaction isn’t happening unless you fork over additional $5k to the bank.
There are tons of creative ways to make this easier, like you can make an offer on new please that’s contingent on old house selling, you can do bridge loans, and it gets complicated.
My advice, hire a competent realtor and they can talk through all your options.
Good question! Depending on how much equity you have vs how much you can get it sold for will determine your profit or how much you will have to bring to the closing table after closing costs and everything.
Regarding the in between you can always do a home sale contingency when making offers on a new home what this does is when you make an offer on your new home it is only “ contingent” on if you sell your current home so your not stuck owning 2 homes at once.
Hope this helps DFW Realtor
Buying a new home may not be worth it if you cannot price your home to pay off the mortgage AND pay closing costs. And also give you a down-payment on the new home, depending on your goals. There are ways to bridge the gap in paying both homes. A contingency in buyer’s contract that the old home sells. A bridge loan to pay mortgage until the old home sells. Etc. Once the old hime sells, if you are already in the new home, some mortgages allow a recast. This is where you put the profit as a 1 time payment to reduce principle and re amortize
I sold my condo this past Monday and I am currently renting an apartment until I find my next condo to buy. I wanted nothing to hold up the sale (my condo was falling apart) so getting rid of that place was more important to me than finding my next one.
Personally our DTI is so low that we don’t even have to sell our home in general to buy a new one. However we’re using some funds from our current home so we’re doing either a HELOC (home equity line of credit) or a bridge loan. It allows our offer to be home sale contingency free but still use our equity as if we had sold it already. We’re still hunting for our new home but when we go under contract we will immediately list ours and then give ourselves at least a week between settlements. Most of our items are in a storage unit that we just got and our main items are still here so moving shouldn’t take terribly long.
Bridge loans and contingency offers were out of the question to be competitive in this day.
When we were buying a new place we: had to take all our savings to buy the new house, move, then list/sell our house and replenish savings.
Or people rent in between if you need the home sale proceeds for the next buy. Or you stay put and make it work.
And as others said- the title company handles all the bills – the pay off your mortgage, they pay the fees, they pay the realtors and the taxes and if there’s money left over they cut you a check.