After you sell your home, your remaining mortgage balance becomes a debt owed to the lender on the property. The mortgage balance is typically the amount you owe on the loan after any payments have been made. Once the mortgage balance is paid off, the lender will officially release the deed to your property and you will be the owner free and clear. If you still owe money on the loan, the remaining balance will be added to the principal balance of the loan. This means that the remaining balance will be added to the original loan amount and will increase the amount of the loan that you owe to the lender.
Most lenders will release your mortgage within days of the date you received the proceeds from the sale.
Once you have signed off on the final sale of your home, you will need to contact your lender to request the payoff on your loan. After you do this, your lender will issue a check for the remaining balance on your loan. You will receive this check in the mail. It is important that the check reaches you within a few days of the sale of your home.
If you don't take the proceeds from the sale, your lender may release the mortgage days after the buyer closes on the property.
You’ll want to talk to your lender before you sell to make sure they’re still willing to take a loss on the loan. Typically, they’ll wait a few months for the mortgage to fully pay off before releasing the deed. After the sale, the mortgage company will likely send a final payoff statement to your new owner, which should detail the amount you still owe on the loan and any accrued interest.
In some instances, your lender may choose to stay with the mortgage and continue to pay it.
If you sell your home, the lender will likely want to be repaid in full. However, they may agree to a partial repayment. Sometimes they’ll require you to pay a portion of the outstanding balance in cash and the remainder in a new mortgage. Other times, they may offer you options like a graduated repayment schedule.
The earlier your lender releases the mortgage, the earlier you can refinance or pay it off.
One of the biggest questions that home buyers will ask is whether or not they have to pay a mortgage after they sell their home. The answer is it depends. There are two types of mortgages: traditional and private. A traditional mortgage is one that the lender holds and continues to pay after you sell your house. Private mortgages are ones that belong to the buyer or the lender.
Your lender may allow you to pay off the mortgage early if you pay a prepayment penalty.
You generally have two options: pay off the remaining balance before the end of your loan or refinance the remaining balance. If you choose to refinance, you’ll need to verify that the new lender approves your mortgage application. If they do, they’ll likely require you to have a certain amount of money in the bank before they’ll issue you a new loan.
You will need to pay any outstanding taxes and insurance on the property.
Depending on the terms of your original mortgage, the lender may be entitled to a portion of the proceeds from the sale of your property. The amount they will receive usually depends on the outstanding balance remaining on your mortgage at the time of the sale. They may also have a claim against the remaining balance in the form of a deficiency judgment, meaning they will be able to pursue you for the difference between what you owe them (the mortgage balance) and the amount you receive for selling the house. The best way to avoid this situation is to refinance your existing mortgage or pay the remaining balance in full before you sell.
You may want to check with your lender if you have a loan or HELOC that you need to refinance or pay off.
When you sell your home, you hand over the keys to the new owner. At that point, the mortgage technically belongs to the new owner as well. However, the mortgage company still holds the money that you borrowed. After you sell your home, you have two options: Pay the remaining balance owed on the mortgage or refinance.
Conclusion
One of the biggest downsides of selling your home is that you’ll need to refinance or pay off your mortgage. That means that you’ll have to pay both the principal and interest on your loan until it’s gone. If you’ve borrowed a large sum, you may not be able to do that. For example, if you owe $500,000 on your home and you sell it for $400,000, you’ll need to refinance your mortgage at a lower interest rate to pay off the remaining balance.