You can sell a mortgaged home to buy a new one. There are several options but you will need to follow a series of steps to do so. The reason is that you can not sign a contract of sale if the property is not free of charges.
In this article we explain what you can do and what are your alternatives to get a new home.
How can I sell my home if I still have an unpaid mortgage?
If the sale price is higher than the mortgage that is pending. In this case, a part of the purchase price is used to pay the outstanding debt and also the cancellation costs of the loan. Here are the steps to follow:
- Ask the bank for an outstanding debt certificate
- Present this certificate in front of the notary.
- The buyer will deliver two checks: one of them is for the seller and the other for the bank. The latter must cover the debt and cancellation costs. Once the total reimbursement of the mortgage is demonstrated, the sale can be processed.
If the outstanding debt is greater than the value of the sale, then it is necessary to ask the bank to cancel the loan and replace it with another with higher interest. Steps we can take:
- Inform our bank that we want to sell the house and see if you agree to cancel the mortgage with the amount of the sale plus a personal loan.
You can cancel the loan at the time of purchase. One part will serve to pay the outstanding mortgage debt and another for you.
When doing this operation, it is necessary to take into account if the loans that we signed at the time contain penalty clauses for amortization or cancellation. If what you have to pay for it is a lot, maybe you should consider another option.
In this case, the buyer of our house acquires the outstanding mortgage loan as payment for it.
Of course, the operation must be accepted by the bank. This must check the solvency of the new mortgaged and see what their financial profile is.
If you are in a hurry to buy your new home and have not yet managed to sell yours, there is the option of the bridge mortgage. In this case, the bank allows you to join the old loan with the new one in a single credit.
Its term ranges from 6 months to 5 years, time you will have to sell your first home and pay off the mortgage debt. Once this step is done, the next thing will be to convert the bridge mortgage into a conventional one.
When we manage to sell our house we must pay off the mortgage we have on this property. With the money that we have over we can reduce the amount we need for the new property.
To carry out any of the operations we have mentioned, hire the services of a mortgage advisor. He will be able to manage with the bank the best conditions for your loan.