How to Sell your Property when you Still owe Money in the Mortgage?
A lot of people seem to be concerned about how you can actually sell your property when you still have an existing mortgage. Yes, that is something that you can do. There are a couple of things that you should consider before selling.
First things first, what you should do is to call the bank first. Why? you need to call the bank because you need to find out how much you still owe the mortgage. When you call them, you’re going to tell them that you need to see or you need to get access or you need to know how much you still owe through a payoff statement.
A payoff statement, it’s what’s going to let you know how much you owe in total in your mortgage.
What a lot of people don’t know is that the interest are still accumulating on a daily basis so you think that what you owe is the amount that you see on the website of the bank but what you’re not seeing is that, for example, that on the day that you decided to call the bank, it falls on the ninth day. When you’re checking your mortgage statement, you’re saying, on the 9th, that your balance is $200,000 but that’s not accurate.
If you call the bank and you’re asking for a mortgage payoff statement, chances are the number that you’re seeing there is not including the daily interest that it has been accumulating in your mortgage. Therefore, you could end up owing a lot more than what you’re seeing in that statement. That’s why it’s important for you to give the bank a call to understand how much are you truly left or how much are you truly owning in that mortgage.
They could come back to you after a couple of days, they usually send you that mortgage statement either via email, through secure email or in your mail, and you’re finding out that the true balance that you have after everything is, $205,000. $205,000 is what you owe in that mortgage. Now, what you’re going to do is you’re going to assess what’s the market value of your property. Why? Because you don’t want to sell a property and still have that be underwater.
How to sell your property: Value of a property
Let’s say, the values of the property drop and the most you’re going to get out of the house is $150,000 so even if you sell that property, that means you still have to come up with $55,000 to pay for this. That’s not even including closing cost, which is usually about one to three percent of the amount of the selling price. If the market is going well, let’s assume that houses aren’t your area because real estate is actually local.
If things in your area have been doing pretty well, the job market has been improving a lot, therefore, the prices of the property have been going up. For example, your property, the market value of the house is $300,000 and what you own is $205,000 then you could consider selling it.
The area in which your property is located can help you increase the sale price
What you’re going to do is you’re going to put it on the market, you’re going to sell it and then with whatever amount that you get out of that sell, you’re going to go ahead and pay the bank whatever amount of money that you owe and also cover the cost of your realtor, if you decide to use a realtor to sell your property.
If for whatever reason you’re not doing well, let’s say if the property has gotten down, then you could have the option to either talk to the bank and see if you can do a short sale or just simply wait it out to see if the market conditions can improve.
Sell your property quickly
If things are actually going well and it’s definitely $300,000 and you know you can make up for the difference, you can cover the mortgage payment, one thing you also need to consider is that this scenario is assuming that your house is actually selling quickly. Remember, the longer your house sits in the market, the higher the payoff amount.
Why? Because you’re letting more days go by 11, 12, 13, 14, 15, so assuming that you sell your property quickly within three weeks to four weeks then chances are your payout statement will still continue to be the same amount. If it takes longer than a month, two or three months, there’s a very high likelihood you’re going to have to call the bank again to request a new payoff statement.
Why? Because this number of days that go by, that only means that the longer that it goes by, the more interest you’re going to end up accumulating. Also, you’re still responsible for the mortgage payments while the house is being put up for sale, so nothing pauses, nothing stops, you are still liable for making the payments because you actually sign a document promising the bank that you will be responsible to make those mortgage payments for as long as the mortgage is still in effect.
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