The Complete Guide to Selling a House With a Mortgage: Know Your Options

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A beautiful house for sale with a mortgage attached.

It can be difficult to sell a house with a mortgage attached to it. You may not be able to get the full value for your property, and you may have trouble finding buyers who are willing to take on the mortgage. In this blog post, we will give you some tips on how to sell a house with a mortgage attached. We will also provide information on what to do if you are unable to pay the mortgage. Don’t stress- read on for our expert advice.

Can You Sell a House Before Paying It Off?

Yes, it is possible to sell a house before paying it off. The typical term of a mortgage is 15 or 30 years, but the average period that people stayed in their houses fell to eight years, down from 10 years in 2020, according to data from the National Association of Realtors. That being said, most sellers have a mortgage.

So what happens to your mortgage when you sell your house? When you sell a house with a mortgage attached, the proceeds from the sale go to pay off the mortgage. This leaves the new owner with whatever is left over. If there is not enough money to cover the mortgage in full, the lender may come after the seller for the remaining balance. It’s important to note that selling a home before paying it off can have tax implications. For more information, consult an accountant or real estate professional.

Selling a House With a Mortgage Attached

So thankfully, you are not stuck in a home until you pay off every last dollar. Here are the quick points to know on how to sell a house with a mortgage attached:

  • You’ll use the proceeds from the sale of your property to pay off your existing mortgage. At closing, your lender will receive their payment.
  • After you pay off the mortgage and selling fees, such as commissions and taxes, you will ( hopefully!) be able to keep some of the profits.
  • If the amount of your home’s sale falls short of what you still owe on the mortgage and costs associated with selling, you will have to make up the difference using other sources of funding.
  • In today’s market, where property values have skyrocketed, isn’t usual for sellers to owe more than their house is worth, a condition known as being “underwater.”
  • There are three primary factors that contribute to a mortgage becoming underwater: falling behind on payments, selling too soon, or selling during a market crash.
A beautiful suburban house with white exterior

How to Sell A House Before Paying it Off

If you’re ready to sell your home, follow these steps on how to sell a house before you pay it off.

  1. Check your home value

Begin by determining how much your property is worth. A free online home value estimator may provide you with a starting point.

Keep in mind that price estimates are not a promise of what your house will sell for on the open market. A buyer may be ready to pay more or less than what your estimate predicts on the open market.

A more precise number will be given to you by a real estate professional using a comparative market analysis (CMA), which analyzes the worth of your house based on comparable sales.

A real estate expert will access comparable sales from their local MLS, giving them a better idea of the area. An expert will also likely want to do a walkthrough of your home so they can get an accurate assessment.

Another way you can get an unbiased opinion of the value of your home is by hiring a Tennessee home appraiser. Home appraisers in Tennessee are state-licensed professionals who have the experience and education to determine the value of a property.

The cost of an appraisal depends on the size and location of your home, but you can expect to pay between $300 and $600.

An appraisal is not the same as a CMA, but it will give you an objective value for your home.

  1. Contact your lender

Next, figure out how much you still owe on your mortgage. According to the Consumer Financial Protection Bureau, your lender is required to provide you with the total amount required to settle the debt as of a certain date, known as the payoff amount.

The payoff amount includes any interest you owe until the day you plan to pay your loan in full. Once you close on your house, your escrow company will coordinate with your lender to get an updated payout amount and use the proceeds of your home’s sale to settle the debt once and for all.

  1. Estimate your net proceeds

After you collect a home value estimate and your mortgage payoff amount, use this easy home sale proceeds formula to estimate your profit:

Credit/Debit For the SaleExample Calculation
Market value of your home$300,000
(-) Mortgage payoff amount$100,000
(-) Agent commission (5.4% average in TN)$16,200
(-) Approximate closing costs (1-3%) $6,000 (2%)
= Estimated home sale proceeds $177,800

You won’t know the credit/fee breakdown until you receive your expected settlement statement at closing, but a rough estimate now might help you see whether it’s the right time to sell from a financial standpoint.

Many sellers underestimate the expense of selling a property, which can total roughly $31,000 not including the mortgage payback.

If the difference between your home value and estimated selling costs is smaller than you thought, you can decide whether it makes more sense to sell now or wait a few years until you have built up more equity.

  1. Determine a Selling Strategy

If you haven’t done so already, now would be a great time to figure out what selling strategy you’ll use to sell your house.

Each option comes with its pros and cons. You’ll need to weigh the options and decide what’s best for your unique situation.

The biggest thing that determines which strategy to use is cost. Each option involves either realtor commissions, closing costs, or both. Realtor commissions generally cost 5%-6% of the final sale price. The commission is split between the buyer’s agent and the seller’s agent. If you’re selling a home, you usually pay a commission to both your listing agent and the buyer’s agent when your home sale closes.

Here’s how commission costs break down by home sale price with a total commission rate of 6%.

Home Sale Price6% Real Estate Commission 

Closing costs are another expense to account for when selling your TN home. In total, the costs range from around 1% to 7% of the sale price, but sellers typically pay anywhere from 1% to 3%.

However, there is one selling strategy that doesn’t require any realtor commissions or closing costs, selling to a cash buyer.

Selling your home to a cash buyer is the quickest and most convenient way to sell your house. You don’t have to worry about making repairs, finding an agent, dealing with showings, or waiting months for a sale to go through.

Before you decide what selling strategy you’ll be using, make sure to check out the benefits of selling your house for cash!

  1. Set a price for the home

Next step, determine an appropriate asking price for your home. If you want your home to sell, ensure that the price is both market-competitive and representative of what a real buyer would be willing to pay. Oftentimes, people make the mistake of overpricing their homes; as a result, the house becomes stale on the market without any offers. This will then cause you to accept a lower price.

A comparative market analysis, or CMA, is an important tool an agent will use to help you understand the value of your home. The CMA includes data such as recent sale prices of similar homes in the area and local market trends.

The CMA will guide you in the pricing process by taking into account your home’s unique features and condition, as well as other relevant factors such as inventory levels and price patterns for the area.

  1. Accept an offer and open escrow

After your buyer accepts your offer, you’ll move on to the next steps of closing, like the home inspection and appraisal. You may be wondering if it’s necessary to contact your mortgage lender about selling a home with a mortgage and repaying your remaining balance. However, there’s no need to worry–your escrow company will take care of those details.

You’ll just continue making your payments and as you get closer to the closing date, the escrow or title company that’s going to be handling your transaction will reach out to your lender and get an official payoff statement based on an actual closing date.

  1. Review your settlement statement

The last thing you’ll do before finalizing the sale of your home is to look over your settlement statement. This is a list, broken down by item, of all the fees and credits related to the financial side of this transaction.

This is where you’ll be able to notice things more clearly like:

  • The sale price of the property
  • Your exact mortgage payoff amount
  • Additional closing costs being subtracted from the price
  • Who’s getting paid, including agents collecting commission, local governments owed taxes and recording fees, and final charges going to the lender
  • Net proceeds (which will likely be at the bottom labeled as total credits to the seller)

As a final review, take some time to walk through the statement with your agent or escrow officer to make sure that everything is accurate and accounted for. After that, you’re ready to sign on the dotted line and hand over the keys! Congratulations on successfully selling your home.

5 Benefits of Selling Before Paying Off Your Mortgage

One major benefit of selling before paying off your mortgage is having access Selling your house before paying off your mortgage can be advantageous as it provides several potential benefits including the following:

  1. Gives you extra cash during the closing process, which can be helpful for other financial needs such as legal fees.
  2. If interest rates drop after you’ve purchased a home but before you’ve paid off your mortgage, you could have the opportunity to refinance your loan at a lower rate and save even more money.
  3. Eliminates the risk of foreclosure in case you experience job loss or other unexpected difficulties in repaying the loan.
  4. Allows for extra funds at the time of closing and may result in lower interest rates, leading to potential savings.
  5. Prevent the risk of being unable to repay the loan in case of unpredictable situations, ultimately avoiding foreclosure.
Two elderly homeowners smiling happily after learning some tips to sell a  home before paying it off.

Tips for Selling a House Before Paying it Off

Selling a house can be tricky, and even more so if you still have a mortgage attached to the property. Here are some tips on how to sell a house with a mortgage:

  • Prepare your home for sale: Before putting your house on the market, take some time to prepare it for sale. This may include making repairs, decluttering, and staging it in a way that makes it look inviting to buyers.
  • Get a payoff statement from your lender: Before closing on the sale of your house, make sure to get a payoff statement from your lender This will give you an accurate picture of how much money you’ll owe at closing.
  • Get your finances in order: This means getting pre-approved for a new loan, as well as shopping around for the best interest rates. It’s also important to have your down payment saved up. Here are some other tips on how to buy and sell a house at the same time.
  • Have realistic expectations: When selling a house before paying it off, it’s important to have realistic expectations about what you can accomplish Keep in mind that you’ll likely need to negotiate with the buyer and may have to come down from your asking price
  • Consider making upgrades: Making some strategic upgrades to your home can help it sell faster and for a higher price. Some upgrades that may be worth considering include:
  • Fresh paint: A fresh coat of paint is one of the most inexpensive ways to make your home look more appealing to buyers.
  • New flooring: If your floors are in bad shape, installing new ones may be worth the investment.
  • New appliances: Upgrading to new, energy-efficient appliances can give your home a fresh look and make it more attractive to buyers.

These are just a few ideas to get you started. Talk to your real estate professional about which upgrades may be most beneficial for your home and your situation.


Selling a house with a mortgage attached doesn’t have to be an overwhelming process. With the right preparation and guidance, you can successfully sell your home and move on to the next chapter of your life.

If you find that selling to a local home buyer would be the best for your situation, we would be happy to chat with you and give you a no-obligation, all-cash offer for your home. We buy houses in Knoxville, Chattanooga, and Nashville. Feel free to reach out to us anytime! Whether you need to sell a house fast in Chattanooga or you want to sell a house in Nashville, we’re here to help. Call us at (865) 999-0025 or fill out our online form and we’ll be in touch soon!

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