You may want to sell your house after taking out a home loan, but what if the property has a second mortgage? Thankfully, having multiple mortgages won’t stop the home sale. However, the process may look different from what you expect.
Consult the guide below to learn how to sell a house with a second mortgage.
What Exactly Is a Second Mortgage?
When learning all about mortgages, second mortgages or subordinate liens may come up. These are secured loans that people take out against properties that already have mortgages. Homeowners may take out a second mortgage to purchase a new residence, make home improvements, or pay down debt.
A common type of second mortgage is the home equity loan. This option draws equity from your property as a one-time lump sum, with monthly payments and interest.
The home equity line of credit is another option. Instead of a lump sum, a lender will offer a line of credit with a set limit, similar to a credit card but with lower interest rates.
Can You Sell a House With Two Mortgages?
Selling a home with multiple mortgages is possible, but you must address all of them before transferring ownership. Second mortgages and HELOCs show up on closing documents, so you can’t ignore them.
Follow these three steps to sell a house with a second mortgage:
1. Learn Your Home’s Value
Determining your home’s value before selling it with a second mortgage is important. You must ensure that the sale price is enough to cover both loan balances. If you intend to sell through a real estate agent, you should also factor in closing costs, agent fees, and other expenses on top of the loan balances.
2. Review Prepayment Penalties With Your Lender
Lenders may charge a prepayment penalty when property owners pay off their home loans ahead of schedule. Ask your lenders whether they charge this fee when you contact them for your mortgage payoff amounts.
3. Pay Both Outstanding Loan Balances
Use the sale proceeds to pay the remaining balances on both mortgages. Any remaining funds after paying off the debt and covering selling expenses will go to you.
What Happens if You Don’t Have Enough Equity in the House?
If you lack enough equity to pay off your second mortgage, you may have to negotiate with your lender. You’ll need lienholder approval to pay less than your full balance. The lender may let the sale go through without the lien, with or without the debt.
Sell Your House Fast With Sell Pittsburgh Now, LLC
Now that you know how to sell a house with a second mortgage, streamline the process by partnering with an experienced cash buyer. Sell Pittsburgh Now, LLC, buys all types of houses in as-is condition throughout the community with no fees, commissions, or closing costs.
We can help simplify the home-selling process with fair cash offers and fast closings, whether you have multiple mortgages or need to sell during mortgage forbearance. Get a no-obligation cash offer today by calling (412) 275-5238.