Selling A House With A Mortgage: Our Complete Guide

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When it comes to selling a house, there are plenty of decisions that need to be made concerning your budget and relocation. However, one element that is not often discussed is what to do with your mortgage. Is it possible to sell a house with a mortgage? Can you take it with you? Or do you have to pay it all at once? 

In this blog post, we will be exploring the different options available to you when it comes to selling a property with a mortgage, if you can port your mortgage, and when you should apply for a new mortgage. 

Looking for a quick answer? Check out our interactive menu below! 

Selling a house with a mortgage

As we have already mentioned, one of the most important decisions you will have to make when selling a home with a mortgage is what to do with the mortgage. If you are reliant on a mortgage to fund your onward purchase, then you will have two main options. You can either port your mortgage and take it with you, or you can apply for a new one. 

Before you make any decision, you should carefully weigh up the costs that will be involved with each decision and take into account your own personal situation. You will need to check how much it will cost to stay with your current mortgage lender compared to if you were to move to a new product. You will also need to consider early repayment charges, which you may be subject to if you are trying to pay your mortgage off early and move to a new product. 

Can I transfer my mortgage to another property?

Yes, you can! The process is known as ‘porting’ and occurs when you wish to move your old mortgage over to your new property with you. The majority of mortgages are portable, and as long as you meet your mortgage lender’s criteria then you should be eligible to retain a favourable product and rate of interest, which you would have been unable to do if you had decided to make a brand new application. 

The advantage to transfer your existing mortgage deal is that it has the potential to save you thousands of pounds having to reorganise a new mortgage deal and you can carry on your mortgage payments as usual.  

As most property sales complete and purchase on the same day, the mortgage can jump straight from one property to the other and you will continue paying your mortgage as usual. If you will not be taking ownership of your new property, then your lender may still let you port your mortgage, but there may be conditions attached. These conditions could include completing within a timeframe, usually around 30 days. 

What happens if your mortgage lender refuses to let you port your mortgage?

If your lender refuses to let you port a mortgage, then you will have to apply for a new mortgage. You can do this with either your current lender or a new one. 

To do this you should speak to an independent mortgage broker who can help you find the very best mortgage deal on the market. A mortgage broker can scour the market and weigh up the deals that every lender will have available. They will be able to guide you through the process and answer any questions you may have, 

Can I sell my house before my mortgage term is over?

Yes, you can! As long as you can afford to do so, you can sell your property at any time. If you are not buying a new property and have decided to redeem your mortgage in full, then it is crucial that you make sure that the sale price is higher than the amount you have left to pay back on your mortgage. If you are in negative equity, then you may want to carefully consider your decision to sell. 

However, the cost of selling your house before you have paid off your mortgage is something you will need to consider. Regardless of whether or not you plan on purchasing another property, there are likely to be extra costs to pay, especially if you are still within a time frame where early repayment charges apply. 

When I sell my home what happens to my mortgage?

Typically, when you sell your home your mortgage on your existing home will be paid off, unless you are porting it. Your lender will be contacted through your lender for a redemption statement through your solicitor or conveyancer, who will then repay the outstanding loan from your completion fund. If you will need a mortgage for your onward purchase, then you will need to make a separate application. Applying for a separate application will need to be done regardless of whether you are porting or applying for a new product. 

Do you need a new mortgage when you sell your house? 

You may be asking yourself ‘do I need a new mortgage when I sell?’ The answer is maybe. If you are unable to port your mortgage or you do not want to, then you will need to apply for a new one. If you have only recently moved into your current home, then you need to be aware that you could still be in your initial introductory period and could face an early retirement charge. If you do find yourself facing an early repayment charge, then it could cost you to pay back the loan early, which can add up as it could be 3%-5% of the outstanding loan amount. 

What if I am in negative equity? 

When it comes to selling your home, you will need to be wary of whether or not you are in negative equity. Negative equity is when you owe more on your mortgage than what your property is worth. You can end up in negative equity for several reasons, such as house prices decreasing, however, more often than not, you end up in negative equity because you have taken out more than one home equity loan, like a second mortgage. 

If you are in negative equity then not to worry as you can still sell your home but you will need to make up the mortgage shortfall in order to pay off the full amount. You can do this however you want, whether this is with savings, or potentially by taking out a larger mortgage. However, you will need to be wary before doing this and should speak with an independent financial advisor first to make sure this is not only an option available to you but also one you should be taking. 

Should you wait to pay off your mortgage before selling?

Some homeowners decide they wish to pay off the mortgage they have currently before selling their property to buy another property. In doing so they can use the profits from the house sale for anything they choose. Whilst waiting until you pay off your mortgage does provide you with more freedom and the ability to pocket the profit from the house sale, it also involves waiting until you have paid everything off, which can take decades.  

As we have already discussed, you can sell your property at any point in your mortgage, as long as you are prepared to pay off any outstanding mortgage debt. Should there be an early repayment charge in place with your lender, you will need to weigh up whether or not you wish to pay it, or if you can delay your sale to avoid the charge. 

Can I apply for a new mortgage if I am still paying off the mortgage?

If you are still paying off your current mortgage, there is nothing stopping you from applying for a new one. You will need to make sure that your current lender is aware that you will be paying off your current mortgage in full when you sell so that they can factor this into your affordability checks. Having a mortgage whilst selling a property should not stop the sale. As long as you are careful to check the terms and conditions of your mortgage and are aware of any extra costs you may have to pay, your selling journey should be a smooth one. 

This covers everything you need to know about selling a house with a mortgage! If you have any questions, queries, or insight into the matter, please feel free to get in touch

photo of Alexandra Ventress

Alexandra is a junior content producer who enjoys writing articles and finding out more about the property market. Read more about Alexandra here.

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About Alexandra Ventress 91 Articles
Alexandra is a junior content producer who enjoys writing articles and finding out more about the property market. Read more about Alexandra here.

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