How To Sell a House With Mortgage in Sacramento

How To Sell a House With Mortgage in Sacramento

Many people like to sell their homes to start fresh, but they’ve taken out a mortgage that’s not even close to being paid off. Many people who sell their homes have an outstanding mortgage balance, but it doesn’t get in the way of selling a home. 

As you continue reading below, we’ll discuss how to sell a house with a mortgage in Sacramento to make selling a home in California a breeze! 

Can You Sell a House With a Mortgage?

When you sell a house with a mortgage, equity is the key to selling. Home equity is the amount on your home that you’ve already paid off, the amount that you outright own. For example, if your current home is worth $300,000 and you owe $150,000 on the mortgage, you have $150,000 in home equity.

When signing the purchase agreement and finalizing the sale of your home, this is the amount of cash you’ll receive, except for closing costs and additional expenses.

When you sell a home, you need positive home equity to pay off your loan. You can pay the remaining balance of your mortgage as long as you sell your home in Sacramento for more than the balance on your mortgage. 

By using market shifts or making home improvements to boost your home’s value, you can increase your home equity by continuing to pay down your loan balance.
Remember, when we sell a house with a mortgage, closing costs must be paid when selling. If you lack enough equity in your home to repay the mortgage with funds from your sale, you’ll need to find other options to make up the difference.

How to Sell a House in Sacramento With Negative Equity

One of the rare times that it may be challenging to sell a house with a mortgage is if there’s negative equity. When there’s negative equity, it’s referred to as being underwater. In simplest terms, it means your home is worth less than what you owe on it.

In these situations, there are a few options you still may have, which include the following:

  1. Paying out of pocket – To make up the difference, you could pay out of pocket with savings or investments. While this isn’t one of the best options, it can help you maintain good credit. 
  2. Hold off on selling – If you can hold off on selling your home, it might be wise to take this approach.
  3. Short sale – To sell a home for less than its current mortgage, you need approval from your lender. A short sale will impact your credit score; however, you’ll be able to sell without paying the entire loan balance.

Steps to Sell a House With a Mortgage

Below, we’ve compiled a list of 7 steps to sell a house with a mortgage in Sacramento. 

1. Estimate Home Value & Net Proceeds

One of the first steps to sell a home with a mortgage is to estimate the home value and net proceeds. To evaluate how much your home is worth, you can compare it to other homes in your area that have recently sold or homes that are currently on the market.

Another way to estimate your home’s value is to use an online tool called an automated valuation model. To receive the most accurate home value estimation, your best option is to hire an appraiser. Hiring a professional appraiser will allow you to set a price and make you more informed during negotiations.

2. Get a Payoff Statement From Your Lender

The next thing you want to do when you sell a house in Sacramento is to get a payoff statement from your lender. A payoff statement will tell you you must pay the lender when you sell your home. Payoff amounts can change monthly, so you’ll want to get an additional statement when you have a closing date.

When receiving a payoff statement, you’ll receive an amount to pay, which includes accursed internet and other costs. Payoff statements might also have penalties for late payments.

3. Determine Home Equity

To sell a house with a mortgage, it’s essential to know how much home equity you have. Many homeowners invest their home equity into their newly purchased home, while others partially invest and keep the rest. 

Earned Equity

Earned equity is the amount you invest in your home, such as a down payment. For example, if you put 20% down on a $200,000 home, you’ll have $40,000 instant equity.

Home Investment Equity

Any equity gained due to market value is considered home investment equity. For example, if you bought a home for $200,000 that’s now worth $350,000, you’ve earned $150,000 in equity. This is accessible equity that you’d have to do very little to earn. 

4. Find an Agent and Set a Listing Price

If you’re confident in the value of your home, you can now find an agent and set a listing price to sell a house in Sacramento. Finding an excellent real estate agent is essential when working through the sale process.

An excellent real estate agent can educate you on the current market and assist in setting a fair listing price. To help make the home more appealing and to get more potential buyers, a real estate agent may even recommend staging the home.

To sell a house with a mortgage, the real estate agent should create a seller’s net sheet that includes a cost list and how much you have the potential to gain from the sale. 

5. Sell Your Home & Pay Off the Mortgage

Once an offer is received, the closing process can begin, including the sale agreement and purchase. However, you will need to hold off until closing day to receive a buyer’s appraisal.

After you sell a house with a mortgage and close on the sale, proceeds can be used to pay the lender and other additional fees. Whatever amount is left over after closing can be kept as a profit, also referred to as net proceeds. 

6. Closing Costs & Cover Fees

To sell a house with a mortgage, there’s likely to be transaction and closing costs. While the closing costs won’t be too steep, other expenses must be paid, such as real estate commissions, title fees, and, in some circumstances, property taxes.

These amounts can be taken straight from the proceeds when receiving enough money to cover the amount of your mortgage and closing costs.

7. Reinvest Funds

Lastly, to sell a house in Sacramento, once all liens are paid, you can keep the remaining funds. Some sellers choose to reinvest their remaining funds in their newly purchased homes. This is one of the best things you can do when buying a new home and making a significant down payment.

When making a down payment of over 20%, this can help establish home equity. Once the closing deal has been finalized, a check for the remaining amount will be sent. This amount can be used any way you like, whether saving or reinvesting it into a new home.

Selling a House for a Profit: The Final Result

During the time you’ve owned your home, your home’s value has more than likely increased and will sell for more money than you paid for it. While selling for a profit is great, depending on the amount, you might have capital gains to pay on the proceeds.

To owe capital gains taxes, the home must be the primary residence, and you would have needed to make thousands of dollars on the sale.

The Bottom Line

When selling a house with a mortgage, you’ll find that this is very common among homeowners. Actually, you’ll find that many real estate deals in the past and currently have involved homes where the seller still has an outstanding mortgage.

When selling a home with a mortgage in Sacramento, you’ll want to ensure you know the exact payoff amount, the proceed amount, and closing costs. By being aware of the well-detailed cost sheet, you’ll be able to have a full view of what you can expect to receive during the final deal. 

Sell a House With a Mortgage: FAQ

1. What happens when you sell a house with a mortgage?

When you sell a house with a mortgage, the buyer’s funds will pay your mortgage lender and cover any transaction costs, with the remaining amount becoming a profit.

2. How does paying off your mortgage work when you sell your house?

When you sell your home, you’ll use your proceeds to pay off your remaining balance and closing costs while keeping the remaining amount.

3. Can you transfer a mortgage to another person?

Not all mortgages can be transferred, and if they are, the lender can approve the person acquiring the loan.

4. Is it better to pay off a house before selling it?

Before selling, you want as much equity in your home as possible because you’ll need to pay off the remaining mortgage while closing the deal.

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