Selling Your Home Before Paying Off the Mortgage

It's typical to still sell your house even if you haven’t paid off your mortgage. Most homeowners move long before their mortgage is fully paid off, and it’s a process that real estate agents manage all the time.

When you sell, the buyer’s lender pays off your remaining balance directly, and you walk away with whatever profit remains. That profit comes from your home equity—the difference between your home's market value and what you still owe on your mortgage.

If you’ve got positive equity, you pocket the difference. For example, if your remaining loan balance is $300,000 and you sell your home for $550,000, you could make a $250,000 profit (minus closing costs and fees, of course). But even if you owe more than the home is worth—also known as being "underwater"—there are still ways forward.

How to Sell Your House With a Mortgage

Selling a mortgaged home is pretty straightforward, but there are a few additional boxes to check:

1. Get a Payoff Statement
Your first move is to contact your loan servicer and request a payoff statement, which outlines the exact amount you owe. This number changes as you make payments, so if your timeline shifts, just request an updated version.

2. Estimate Your Home Value and Potential Proceeds
Partner with a local real estate agent (hi, that’s where I come in!) to find out how much your home is worth today. Your goal is to price high enough to cover your mortgage balance and selling costs—think agent fees, closing costs, and any prepayment penalties.

3. Prep, List, and Sell
Your agent (ahem 👋) will guide you through marketing, negotiations, and prepping your home for sale. Smart renovations and cosmetic upgrades can boost interest—and even raise your sale price.

4. Keep Making Payments
Just because your house is pending sale doesn’t mean you can stop paying the mortgage. Keep those payments going until the deal is done to avoid delinquencies or penalties.

5. Close the Sale and Pay Off the Mortgage
At closing, the buyer’s funds go straight to your lender to pay off your mortgage. You’ll get the leftover balance after fees and commissions. No stress, no need to pay it off before listing—just smart planning and a smooth process.

Selling and Buying at the Same Time: The Balancing Act

If you're planning to sell one home while buying another, timing is everything. Here's how to play it:

Sell First:

• Pro: You’ll have cash in hand for your next down payment.

• Con: You might need temporary housing between closings.

Buy First:

• Pro: No scrambling to find a new place.

• Con: You could be stuck with two mortgages temporarily.

Some sellers get a bridge loan to tap into their current home’s equity for the down payment, or even rent out the old place if it doesn't sell quickly. Each option has trade-offs—lean on your agent (🙋‍♀️) to help you strategize based on your financial comfort zone.

Selling a Home With a Delinquent Mortgage

If you’ve fallen behind on your mortgage payments, don’t panic—but act quickly. A mortgage becomes delinquent if you’re late by 30 days or more, and that can spiral into default or foreclosure if left unchecked.

In some cases, selling your home might be the best way to get out of a delinquent loan. Here’s how to handle it:

• Review your mortgage statement to see the full amount owed, including penalties.

• Get an appraisal to know if you can cover your mortgage balance with a sale.

• Talk to your lender about options like forbearance, loan modification, or a short sale if your home is underwater.

Time is of the essence when your mortgage is in trouble, but don’t assume it’s game over—there are still solutions, especially with the right guidance.

Bottomline

Selling a home with an unpaid mortgage isn’t just possible—it’s a well-worn path, and I’ve helped countless homeowners walk it with confidence. Whether you're sitting on solid equity or navigating the challenges of delinquency, the right strategy (and agent) can turn confusion into clarity.

If you're thinking about selling—or buying—in Orange County, let’s connect. From payoff statements to purchase offers, Whitestone Real Estate is here to simplify the process and get you moving with peace of mind.

Reference: Suh, E. (2025, April 3). Selling a House When the Mortgage Hasn’t Been Paid Off Is Fine—Unless It’s Delinquent. Realtor.com.