How Do I Pay Off My Mortgage When I Sell My House?

A large proportion of homes in the UK are mortgaged rather than owned outright. Mortgages are gradually paid off – and, in return, the homeowner builds equity in the property.

If you are one of the many homeowners currently paying off a mortgage, you may wonder “what happens to my mortgage when I sell my house?” UK quick home sales specialists Property Solvers will explore this question in the following article.

Should I Pay Off My Mortgage Before I Sell My House?

If you can pay off your mortgage before you sell your property, you’ll have 100% equity. This will make you more likely to turn a profit. However, there are often substantial charges for early repayment.

If you are not in the position to do pay off your mortgage, you may worry that selling your house will be difficult while there is still a loan amount outstanding. This isn’t necessarily the case.

Porting Your Mortgage

Most mortgages are portable. This means you can transfer the loan from your current property to the one into which you are planning to move. It’s best to seek help from a mortgage broker or financial adviser to do this.

As long as your specific product allows it, you may port a mortgage to almost any residential property. This applies whether your new place is more or less expensive than your previous home.

If the new property is more expensive, you may have to pay a valuation fee as well as any charges required to increased your mortgage amount. For a cheaper property, you may still need to pay to confirm the value, but the overall process is likely to be cheaper.

If you haven’t paid off your mortgage before selling your home, you may be able to use the money from the sale to settle the remainder of the loan. Alternatively, if the funds gained from the sale won’t cover the entire remainder of your mortgage, you could request a “short sale” from the lender.

What is a Short Sale?

In a short sale, a mortgage lender agrees to a repayment amount that is lower than the figure outstanding on the loan. The lender will then take the money made through the sale of the house as partial repayment. You’ll need to keep relevant documentation about your property and finances and give them to the lender when required.

Should you mortgage lender refuse a short sale, you will usually need to remain in your current home and continue paying off the mortgage gradually. If you can’t afford this, your property may have to be repossessed.

Can You Pay Off a Mortgage Early?

The average age to pay off a mortgage in the UK is around 57 and a half.  With more people taking on mortgages later in life, there’s a chance it could be later in the coming decades.

However, it’s absolutely possible to pay yours off much earlier. If you’re wondering how to pay a mortgage off quicker than your agreed term, it’s best to be careful. After all, you’re likely to face substantial early repayment charges that may prevent the approach from being financially worthwhile.

Early repayment charges usually sit between 1% ad 5% of the outstanding amount – so you may prefer to port your mortgage to your new property if possible.

What Happens When You Pay Off Your Mortgage?

UK homes are mortgaged for set periods – with the most common being 25 years. Interest is charged over this time, the amount of which may vary according to current national rates, unless you opt for a popular “fixed rate” mortgage.

Upon paying off your mortgage and achieving 100% equity in your property, you’ll receive documentation to confirm this. You must then update the information held by your homeowner’s insurance provider and tax office.

If you’ve lived in the property as your own home (known as the Principal Private Residence or PPR), there will be no tax to pay.

So… Can You Sell a House With a Mortgage?

As you’ve seen above, the question of how to sell a house with a mortgage has a easy answer. You can absolutely sell a mortgaged property as long as that mortgage is portable. If it isn’t portable, you can use the funds from the sale to pay off your debt. Should you be unable to do this, you can apply for a short sale.

Before you may any major decisions regarding your mortgage or home sale, you should first seek assistance from a mortgage broker or financial adviser. They’ll help you to understand the potential outcomes of your next move, and provide helpful advice.

Property Solvers can help you sell your home fast, mortgage or no mortgage. We’ll provide you with a no obligation cash offer up front. Your sale can then be completed within seven days. We can offer up to 75% of your property’s market value, with no solicitor or estate agent fees to pay.

For further information about the services we offer, get in touch with our team today. We’ll be happy to discuss your requirements.