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Selling a house with a mortgage: What you need to know
Thinking about selling your house? If there’s still a mortgage on the property, it could complicate things. Here’s what to consider and how to handle it.
What happens to the mortgage when you sell?
A mortgage acts as security for the bank, allowing the buyer to finance their new home. It’s usually registered to the property and can be taken over by the new owner. When selling a house with an existing mortgage, there are several ways to manage it.
Transferring the mortgage to a new property
One option is to transfer the mortgage to a new property. But this isn’t always possible – the bank will need to agree and certain conditions must be met:
- The new property must be worth at least as much as the one you’re selling.
- The sale of your current home should happen around the same time as the handover of the new one.
- Your financial situation must be largely unchanged since you first took out the mortgage.
Keep in mind that transferring a mortgage involves changes to your contract (and usually some fees). Make sure you check the costs in advance so there are no surprises.
Transferring the mortgage to the new owners
Another option is to transfer the mortgage to the new owners. However, the bank must approve them as eligible borrowers and may adjust the terms of the mortgage if needed. One benefit of this approach is that you avoid early repayment penalties for ending the mortgage before the agreed term.
But keep in mind:
- The bank can deny approval, for example, if the buyer doesn’t meet its credit requirements.
- Taking over a mortgage can complicate the sales process and limit your pool of potential buyers: not everyone is able or willing to assume an existing mortgage.
Ending the mortgage early
The third option is to pay off the mortgage in full before the sale. While this is straightforward, it can be costly – especially if early repayment fees apply.
Conclusion
There are several ways to handle an existing mortgage when selling a house. The key is to contact your bank and notary early to clarify your options. Make sure the purchase agreement clearly states who covers which costs. With good preparation, nothing stands in the way of a successful sale.
