If you want to know if you can sell a house with a mortgage in Tennessee or not, the answer is YES! While many people buy their houses with mortgages, most of them sell those houses before they finish paying the mortgage and still make some profits. However, it doesn’t end in profits for some people. It destroys some people’s credit history with financial institutions. Therefore, taking the best decision while selling your home with a mortgage requires you to have the right information.

This article will let you know the choices you have to make the right decision.

What Happens When You Sell a House with a Mortgage?

There are many ways you can sell a house with a mortgage, and your choice will depend on the amount of equity you’ve built on the house. By equity, we mean your financial investment (the amount you have spent on the home, in terms of mortgage payment and renovations) on the home.

Sell a House with a Mortgage

When you sell a house with a mortgage on a normal day, enough equity should be available to cover closing costs, pay off your mortgage balance, and give you some profits. However, this is not always the case. You don’t always make a profit when you sell a home with a mortgage. If the market value cannot cover the mortgage and closing costs, then the seller will not be able to make any profit. In some cases, the market value might not even be enough to pay the mortgage owed on the house.

Therefore, you need to know which category your home falls into to make the right decision. This means you need to know your home’s value and how much you owe on a mortgage.

Find Out the Balance of Your Mortgage

Before you sell a house with a mortgage, you should determine how much of a balance you have to pay on your mortgage. Getting this information from your lender is the ideal way of getting the exact estimate of what you owe as a mortgage. Please, do not confuse the payoff amount that appears on your monthly mortgage statement as your remaining loan balance as they are two different things. Unlike the loan balance, the payoff amount contains the accrued interest over the stated period, making it the most accurate figure.

Finding out your mortgage payoff quote is vital when you want to sell a house with a mortgage. Request your payoff quote from your lender months before your home selling process begins. If you sell your home without a profit, it is referred to as a short sale.

What is a Short Sale?

When you sell a house with a mortgage, a short sale means selling your home for lesser than the mortgage you owe. The process involved in a short sale is quite different from other forms of a home sale. Your lender must approve your sale offer and agree to incur a loss before you can proceed with selling the property. This approval process can slow down the whole home sale process.

A short sale will affect your credit score with your lender, and you will have to forfeit the down payment you made to your lender while buying the home. Whether you’re going to profit after selling your home with a mortgage or not, you have to set up an escrow account.

Set Up an Escrow Account

There are two types of escrow accounts you can use to process a home sale. The home seller’s choice will depend on whether there is a mortgage on the home or not. If there’s a mortgage on the house, the Mortgage Lender Escrow Account would be used. However, if there’s no mortgage on the house, the Purchase and Sale Escrow Account would be used.

  • The Mortgage Lender Escrow Account

When you’re buying a house with a mortgage, the mortgage lender will set up an escrow account to keep all parties safe. This type of escrow account is used to withhold funds to pay up real estate taxes, homeowners insurance, and mortgage insurance. The account is created when purchasing a home, funded by the home buyer, and remains open for the mortgage lender to help pay off any recurring bills until the mortgage is fully paid.

When you close your home sale deal, the lender prorates the balance from the closing date and pays you what is left. This balance mostly comes from property taxes and homeowner’s insurance, since the former is paid every six months while the latter is paid annually. This balance is often referred to as excess escrow, which should be disbursed within 20 days after closing.

  • Purchase and Sale Escrow Account

The purchase and sale escrow account is opened whenever you’re ready to sell your house. It is usually managed by a third-party escrow agent responsible for keeping all funds, including your money and the buyer’s, until the deal is closed. The fees for operating this account is shared between seller and buyer equally.

As soon as the deal is closed, the escrow agent must ensure that all payments are made to the necessary quarters involved in the deal, including their profits.

Understanding Your Equity

Learn How to Write a Counteroffer

Before you sell a house with a mortgage, you should learn to write a counteroffer to prevent buyers from taking advantage of you. Accepting the buyer’s offer is not always advised; you should counter them and provide them with the opportunity to do better. Paying closing costs is a great way to attract more serious buyers as the deal will attract them. You can also get the deal done faster when you provide incentives to agents of the buyers.

Avoid Contingent Offers On Your House

With a home sale contingency offer, your home’s buyer has to sell their old house before making payment for your house by a specified date, after which you can cancel the contract. If a buyer has a contingency offer, you have to wait until they sell their old home before you get your payment.

Ensure that you have the right to accept a better offer when a buyer makes a contingent offer or ask the buyer to rule out the contingency. Doing this will help you weigh your options and get the best buyer for your house and make more profit.

What Happens to Your Mortgage When You Want to Sell a House and Buy another House at the Same Time?

When you’re trying to buy a new house and sell your old house simultaneously, the best option is to sell your old home first. This method allows you to receive payment from selling your old home and use the proceed to pay for your new home.

If you want to buy first, you will need another finance source to do so, such as getting a short-term or bridge loan. A bridge loan helps you pay off your old home’s debt and make a down payment for your new home. As soon as you sell your home, the proceeds will be used to pay off your bridge loan.

You can also use the two-mortgage method, whereby you get another home on a mortgage (that you get from the lender due to the equity on your old home) while looking for a buyer for your old home. Another option to consider when you want to sell a home and buy a new one at the same time is to use the home contingency sale explained earlier.

An option to quickly sell your home is to use the services of an investment company like Aniya Equity LLC.  They will quickly buy your current house, allowing you to move on with the purchase of your new dream home.

No doubt, there are complexities in selling a house with a mortgage in Tennessee. Nonetheless, we believe the information above will be of great help to you. Moreover, you can contact us at Aniya Equity for timely advice. We’re always happy to be of help to you.