When you sell your house at a discounted price, the bank will take into account the current market price and the amount that you owe on the loan. They will also figure out the net profit that you made. After deducting the costs, they will give you the remaining amount.
It depends on the type of loan you have.
A home loan is a debt. When you sell your house, the lender would like to recover the money you owe them, including the principal. However, the actual repayment process is different for each lender. Some will require you to pay the remaining balance in full after you sell your home. Others will allow you to pay off the remaining balance in monthly installments.
If you don't pay your mortgage in full, the lender can pursue you to take your house.
If you sell the house for less than the remaining balance, then the bank gets a loss. However, if you sell the house for more than the remaining balance, then you owe the bank the difference, known as a capitalization loss. The capitalization loss is treated like a tax loss.
If you have a home equity loan, the process will be a little different.
When you sell your house, the bank will deduct the money you owe on the principal, as well as any accrued interest, from the proceeds of the sale. They will then pay you any remaining money. If you have a mortgage with a fixed rate, the bank will continue to deduct the interest payments from the loan proceeds each month, even after you sell your house.
If you have a line of credit, it will be paid off according to the terms of the agreement.
The bank will have the house appraised. The bank will take the new sale price and subtract the outstanding mortgage balance. If the new sale price is lower than the outstanding mortgage balance, the bank will pay you the difference. If the new sale price is higher than the outstanding mortgage balance, the bank will take the new mortgage balance as the loan payoff amount.
If you are behind on your mortgage payments, the bank will begin the process of foreclosure to sell the property back to the lender.
Once your mortgage has been repaid in full, the bank will issue a final deed to you. At this point, the bank can legally take possession of the house. If you sell the house for less than the balance owed on the loan, the bank will deduct the difference from the sale proceeds. If you sell the house for more than you owe, the bank will add the amount of the loan to the debt you owe. In either case, you will need to pay the balance owed on the mortgage.
If you are current on your mortgage payments, your lender will likely refinance the loan.
If you sell your home, you'll likely have to pay off the remaining balance on the loan or refinance the remaining balance. Once you've paid off the remaining balance, you'll be the owner of the home free and clear.
The refinance will lower your monthly payments and your refinance rate.
After you sell your house, you will receive a check in the mail from the lender. This check should be negotiated and paid to you once the sale transaction is complete. However, if you fail to do so, the lender will place a lien on your new home. This means that the home would be held until the remaining balance is paid off.
Conclusion
In the event of a sale, the bank will pay off the remaining balance on the loan using the proceeds from the sale. Once the house is paid off, the bank will issue a deed to the buyer. A deed is a legal document that is given to the buyer when the sale is completed. In most cases, the buyer pays a small fee for the deed or can pay an attorney to do it for them. Once the deed is issued, the buyer is the owner of the property.