How to Sell a House with a Mortgage

The prospect of selling a house with a mortgage can feel daunting, especially for Australian expats living overseas or foreign buyers. But it doesn’t have to be. 

This guide explores the process, offering practical tips and advice tailored to your needs.

Step one: Communicate with your bank

Before you leap into the property market, there’s an important step you need to take: notifying your bank. Many people wonder if they need to notify their bank when selling a house. The answer is a resounding yes.

Why does your bank need to know? 

Essentially, it’s all about transparency and preventing potential complications down the line. Keeping your bank in the loop will make the process smoother and less stressful.

Step two: Navigating mortgage suspension

Perhaps you’re considering suspending your mortgage payments while selling your house. It’s possible, but it’s important to understand the process.

Suspending your mortgage payments doesn’t mean you’re off the hook. Instead, it could give you the breathing room you need to negotiate a sale without the pressure of monthly payments. But interest continues to accrue, and you’ll need to resume payments eventually.

Get a free Australian mortgage assessment today.

Apply online to get a free recommendation with real rates and repayments.

How to sell your property smoothly

Now that you’ve established clear lines of communication with your bank and explored the option of suspending payments, let’s dive into the practical steps of selling your property.

1. Evaluate your property

Before selling, have your property professionally evaluated. This will help you set a fair and competitive price, which is crucial to attracting potential buyers.

2. Hire a real estate agent

An experienced real estate agent can guide you through the sales process. Look for agents with a solid track record in your specific market niche and a keen understanding of mortgage issues.

3. Market your property

Marketing is the key to a quick and profitable sale. Leverage digital platforms, virtual tours, and social media to reach a wide audience.

What happens to your mortgage balance when you sell your home?

When you sell your home, the proceeds from the sale are used to repay your outstanding mortgage balance. Here’s a more detailed look at the process:

  • Your mortgage balance is less than the sale proceeds: You will receive a check for the difference. You can use this money for whatever you want, such as paying off other debts, investing, or saving for a down payment on a new home.
  • Your mortgage balance is equal to the sale proceeds: You will break even. You will not owe any money to your lender, and you will not receive any money from the sale.
  • Your mortgage balance is more than the sale proceeds: You will have a deficiency balance. You will need to pay this balance to your lender. You may be able to negotiate a payment plan with your lender.

How long does the mortgage discharge process take?

The mortgage discharge process can take anywhere from a few weeks to a few months, depending on the lender and the circumstances of the sale. Typically, the process will begin once the sale of the home has closed and the buyer has taken possession of the property. The lender will then request a copy of the closing documents from the title company or escrow agent. 

Once the lender has received the closing documents, they will review them to make sure that all of the terms of the mortgage have been met. If everything is in order, the lender will then issue a mortgage discharge, which is a document that releases the lien on the property. The mortgage discharge will be recorded with the county recorder’s office, and the borrower will then be free from any further obligation to the lender.

Here are some factors that can affect the length of the mortgage discharge process:

  • The type of mortgage: Some types of mortgages, such as government-backed mortgages, may have a shorter discharge process than others.
  • The lender: Some lenders may have a faster discharge process than others.
  • The amount of the mortgage: The larger the mortgage, the longer the discharge process may take.
  • The condition of the property: If the property is in poor condition, the lender may need to inspect it before issuing a mortgage discharge.

If you are selling a home with a mortgage, it is important to contact your lender as soon as possible to start the mortgage discharge process. This will help to ensure that the process goes smoothly and that you are able to close on the sale of your home as quickly as possible.

Things to be careful about when selling a home with a mortgage

Here are some things you need to be careful about when selling a home with a mortgage:

  • Make sure you have enough equity in your home: In order to sell your home with a mortgage, you will need to have enough equity to cover the closing costs. If you don’t have enough equity, you may be able to get a short sale, but this can be difficult to get approved for and can damage your credit score.
  • Make sure you are familiar with the mortgage discharge process: The mortgage discharge process can take anywhere from a few weeks to a few months, so it is important to be familiar with the process and to contact your lender as soon as possible to start the process.
  • Make sure you have all of the necessary paperwork: When you sell your home with a mortgage, you will need to provide your lender with a copy of the closing documents. Make sure you have all of the necessary paperwork before you close on the sale of your home.
  • Make sure you understand your lender’s policies: Each lender has their own policies and procedures for mortgage discharges. Make sure you understand your lender’s policies before you sell your home.

Selling a house with a mortgage: Guide for Australian expats and foreign buyers

Selling a house with a mortgage may seem like a challenging endeavor, especially for Australian expats and foreign buyers. But with careful planning, open communication with your bank, and a clear understanding of the process, you can navigate this journey successfully.

Selling a house with a mortgage can be a challenge, but it’s definitely possible. With careful planning and the right guidance, you can sell your home and move on to your next chapter.

If you’re ready to sell your home, contact Odin Mortgage today. We’ll work with you to understand your needs and find the best mortgage solution for you.

Get a free Australian mortgage assessment today.

Apply online to get a free recommendation with real rates and repayments.

Frequently asked questions

Absolutely. The process involves a few extra steps, but many people successfully sell houses while still paying a mortgage.

Yes, notifying your bank is a critical step. They can guide you through the mortgage release process and prevent any surprises.

Possibly, but this varies by lender and individual circumstances. Always consult with your bank before making any decisions.

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Get a free Australian mortgage assessment today.

Apply online to get a free recommendation with real rates and repayments.
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