Most people take out mortgages when they buy a property. It is not uncommon for a mortgage agreement to last 20 or 25 years, and even longer in many cases. But what happens if you want to sell your property before your mortgage ends?
In this article we will explain everything you need to know about selling a house before your mortgage has been fully paid off.
Can I Sell My House If I Still Have a Mortgage in the UK?
Yes, absolutely. In fact, it would be fair to say that the majority of people sell up and move to a new property before they have paid off their mortgage. A mortgage can be paid off, moved (porting) or remortgaged completely when a property is sold. Most commonly, the seller will repay their mortgage in full from the sale of the property. As long as you can afford to pay off the outstanding mortgage, you can sell your home at any time. Or alternatively, you may wish to transfer your existing mortgage to a new property. Ultimately, you can either:- Sell your property and use the money to pay off your mortgage
- Move the mortgage to another property if you are buying again (porting)
What Happens to My Mortgage When I Sell My House?
When you sell your house, usually the mortgage on your existing property will be paid off from the sale of the property (if you are not porting your mortgage). In order to do this, the sale price must cover the amount which is remaining on your mortgage. Typically, the solicitor or licenced conveyancer who handled the paperwork during the sale of the property will take care of this process.Will I Need to Tell My Mortgage Company That I am Selling My House?
Yes, you will need to let your mortgage lender know if you are intending to sell your house. Getting in contact with your seller is a good idea beyond simply letting them know that you want to sell your house. You can discuss a number of issues around your mortgage and finances with your mortgage lender, including:- Your existing mortgage
- Your finances and budget for your next move
- The value of your current home
- Your borrowing potential
- Early repayment fees on the mortgage
- The possibility of remortgaging or porting
Is It Possible to Sell a House Before the Mortgage Ends With Negative Equity?
If a valuation is carried out on your property and the value is deemed to be less than the outstanding balance on the mortgage, you are in negative equity. If you find yourself in this situation, it is worth talking to your mortgage lender to ascertain whether it really is the best time to sell. Whilst it is uncommon for a property to have devalued in price, it is important to seriously reconsider selling your property as it will not be the best option financially.Do I Need to Pay Early Repayment Charges?
Mortgages usually have a stipulation around early repayment charges. Typically, most people have a fixed term of around three to five years on their mortgage agreement, after which early repayment charges do not apply. Contact your mortgage lender to confirm whether or not you will need to pay early repayment charges. Keep in mind that you could offset the costs of paying early repayment charges by shopping around and finding a new mortgage provider which offers a better deal.What is Porting a Mortgage?
Porting a mortgage loan is the process of transferring an existing mortgage deal to a different property. Porting is popular with homeowners on attractive interest rates, as a new mortgage could bring a higher interest rate due to higher rates. If you have a good fixed-rate or you are still within the early repayment fee period, porting your mortgage could be a great option. Porting your mortgage can save you a lot of money, not to mention saving you the hassle of starting a completely new mortgage application. Mortgage porting is an option for most (but not all) mortgages. Your age, income and employment status, as well as the type of property will all have a bearing on your eligibility. The process of porting a mortgage is generally relatively straightforward and usually involves completing a short application. Typically, there is no fee for porting a mortgage if the loan amount will not be increasing or decreasing. The mortgage lender will still need to value the new property though to ensure that it is worth more than they will be lending. When you port, you are effectively still redeeming your existing mortgage whilst still taking out a new one. The new mortgage still remains on the same terms and interest rate as the ported mortgage. If you are porting and you are selling your property to buy a more expensive one, you may need to get two mortgages. One would be the existing mortgage, and a second mortgage would be to cover the difference in price between the two properties.What to Consider Before Selling a House With a Mortgage
There are a few important points to keep in mind before deciding to go ahead with selling a house with a mortgage:- You will still be responsible for mortgage repayments, insurance and any other household costs until the property is sold
- When you sell your home, proceeds from the sale of the property are used to pay off the existing mortgage balance
- You will need to continue to make mortgage repayments if you do not make enough money from the sale to pay off the outstanding mortgage balance. This needs to be done until the loan is paid in full
How Does Selling a House With a Mortgage Work?
At its most basic level, selling a house before your mortgage has been paid follows a process similar to the one outlined below:- Firstly, work out how much you still have left to pay on your mortgage
- Arrange a valuation of your property
- Determine the repayment method of the mortgage
- Sell your house (assuming that the valuation determined the amount your property can sell for is enough to cover outstanding mortgage repayments)
- Buy a new house
