Pros and Cons of Selling a House With a Mortgage

Ian Mutuli
Updated on

Many homeowners purchase their homes with a mortgage, the most common being a 30-year fixed-rate loan. However, very few people live in their homes for that entire 30-year period and want to purchase something more fitting for their needs before they finish paying off their loan. It might seem like you’re trapped in your property, unable to move on due to your loan agreement, but that’s not the case. You can sell your property with a mortgage, and here are just a few of the many pros and cons of doing so. 

Pro: Experts Are Available to Help

Buying and selling properties can be daunting, and selling a house with a mortgage can be stressful when you’ve never had to navigate this process before. However, you don’t have to do it on your own. If you plan to sell your house with a mortgage so you can build a new one, buy something more suitable for your needs, or free up your funds, there are many experts you can call upon for assistance. Professional home buyers, lawyers, real estate agents, and accountants can all be valuable sources of information. 

Pro: You Can Put the Difference Into a New Home

It might seem like your options are limited once you sell your home. You might have freed up your hard-earned money, but you now don’t have a roof over your head. When you sell your home with a mortgage, you can use any money left over from paying off your previous mortgage as a deposit for a new mortgage. You will simply need to go through the same lending process you navigated when purchasing your first home. 

Pro: You Can Cover All Associated Costs When You Sell

Whether you’re selling to buy another house or you plan to rent or move in with someone else, you can generally cover all associated fees and closing costs when you sell your property. This is typically the case when you make more from the sale than you owe. Rather than having to scrape together funds to pay your lawyer and cover other costs, you can use some of the money you made from your sale and can put the rest toward anything else you wish to purchase. 

Con: You Have to Be Careful With Your Sale Price

One of the most significant risks associated with selling a property with a mortgage is selling it for less than what you owe. If that happens, you might be paying back your lender long after you no longer own your property.   

Con: You Might Have to Sell Fast

As you have a mortgage on your property, you will likely be making repayments until it sells. If your whole reason for selling your property is that you can’t afford the repayments, this can put you in an uncomfortable situation. Fortunately, there are many ways to sell your property quickly, such as advertising it for a highly competitive price or selling directly to an investor. 

How to Sell a House

Now that you’re aware of the pros and cons associated with selling a house with a mortgage, you might be curious about how to sell your house and experience some of those desirable positive points for yourself. 

There are many different ways to sell a house, with advantages and disadvantages associated with all of them. If you’re ready for a ‘sold’ sign to appear on your front lawn, any of these sales methods might appeal to you. 

For Sale By Owner (FSBO)

The FSBO method involves the property owner independently taking care of all parts of the sales process, including marketing, open houses, and property sale documents. While this method allows you to keep any commission you would have handed over to a realtor, it can be time-consuming and requires you to have property sales knowledge. 

Realtor

Selling through a realtor can be a desirable option for many people, especially as they communicate with all prospective purchasers on your behalf, manage the open houses, and handle all the paperwork. However, they can take an average of 6% of the purchase price for their efforts once it sells. 

Professional Home Buyer

A professional home buyer might be worth considering whether you’re selling with or without a mortgage. They can offer a quick cash offer and close a deal in a matter of days. Some professional home buyers are even flexible when you move out and don’t require you to clean or leave your property in immaculate condition. When you’re in a hurry to sell, this sales method can be one of the most preferred.

Selling a property with a mortgage might seem complicated or even impossible, but it’s not. These pros and cons might be worth keeping in mind if the time has come to list your property for sale.

Ian Mutuli

About the author

Ian Mutuli

Founder and Managing Editor of Archute. He is also a graduate architect from The University of Nairobi, Kenya.