Change of job, family situation, or even having found a property that is preferred. These reasons and others may lead you to want to sell your house with a pending mortgage, but the truth is that this condition is not an inconvenience, you have several options to be able to carry out the sale… and without breaking the bank.
The first alternative that comes to mind, and in fact it is the most used, is the cancellation of the mortgage for the sale of a home, since it allows one to completely free themselves from the debt, making it easier for the buyer to make the sale by acquiring a property without mortgage charges.
Canceling a mortgage is equivalent to paying the outstanding balance to settle the debt. As? With the profits from the sale of the property. There are two situations here: the value of the house is greater than the outstanding debt and you can pay it off with the profit from the sale and keep the rest as capital gains; or that the value is less than the debt, and you have to allocate all the profits from the operation to cancel the mortgage, and the amount that remains to be paid will become a new loan with different conditions.
This option will be useful to you whether you simply want to sell or if you also want to buy a new home later. In the first case, you will only have to cancel the mortgage and you will be able to sell the house without outstanding debts. And for the second case, after this procedure, you will only have to remortgage, that is, request a new mortgage for this second property.
It is true that depending on the value of the property, cancellation is not a very feasible option, and even less so if you want to acquire a new home. But there are more alternatives to sell your house with a pending mortgage, and they will entail fewer expenses.
The novation of the loan with a mortgage guarantee is much simpler and cheaper. It is about changing homes while maintaining the same mortgage. This is possible because when you take out a mortgage loan, you have the return of the home as a guarantee, and this guarantee can change. The bank will not put any obstacles in your way if the value of the new property is equal to or greater than the outstanding debt. If not, you will have to extend the mortgage, which consists of modifying the conditions of the loan.
However, if buying a new home is not in your plans, but you only want to sell your house with an outstanding mortgage, you have a very attractive option: subrogate the debtor. Here, the buyer will become the new holder of the mortgage, assuming the obligation to pay the remainder of the loan. This is an option that can benefit both the seller and the buyer, since the former will be able to conclude his debt without finishing paying it, and the latter could obtain better conditions than those in the current market or those possible with his profile. Of course, this possibility must be approved by the bank.
Banks usually have an exclusive service for those owners who want to sell the house with the outstanding mortgage and buy another one, for which a new loan is needed. This service is known as a bridging mortgage.
Basically, the bank advances the money to buy the new home while the old one is sold. It consists of requesting another mortgage for the new home and unifying it with the mortgage still in force, that is, the new mortgage includes the unfinanced part plus the amount pending amortization. During the grace period granted by the bank – usually up to five years – only the interest on the mortgage will be paid and not the amortization of the capital. Thus, the fees will be lower.
The condition is that you must sell the house with an outstanding mortgage within this waiting period, otherwise the fees will be charged normally and will be higher. Likewise, since there are actually two mortgages in one, the guarantee that the bank takes is the two homes, so if you cannot afford the payments, you run the risk of losing both.
Once you sell the house with an outstanding mortgage, the remaining part of the loan is canceled with the profits, and consequently also the bridge mortgage, and a mortgage is formalized for the new home.
Dation in payment. This solution consists of handing over the house with an outstanding mortgage to the bank in exchange for paying off the debt.
This is the last option on the list, and it should be for you too, since it is only appropriate when all the previous ones fail or the house with an outstanding mortgage cannot be sold for a price equal to or greater than the amount of the debt, and you do not have of extra capital to finish paying it off.
As you have seen, it is essential to know amounts, as they will be decisive when choosing the option that best suits you, that is, the one with which you can have more benefits when selling your house with a pending mortgage.
Thus, you must keep in mind the profit that you can obtain from the sale of the home, the outstanding amount of mortgage debt, and the price of the new home, if applicable. It goes without saying that all these procedures entail extra expenses, such as the certificate of outstanding debt, the commission for early cancellation, new opening of a mortgage or subrogation (if required by your bank), interest from the bank itself or the Acts tax. Documented Legal Documents (AJD).
The decision can be difficult, since it is a delicate operation in which you can emerge victorious or lose a lot, which is why it is highly recommended to have professional help who can advise you on the best options for you.
