Are you wondering when you should stop making mortgage payments on a home loan when selling?
Selling a house with an existing mortgage is expected in real estate sales. One key aspect involves understanding when to stop making mortgage payments and how to manage the payoff.
I have put significant effort into making this as straightforward to understand as possible. Here is what you will learn:
- How to handle mortgage payments during the selling process.
- What do you do if your mortgage payment date is near closing?
- It is essential to consult with your lender and real estate attorney for a smooth sale.
From experience being a real estate agent for almost forty years, I get asked all the time by first-time sellers when they should stop making their mortgage payments to the lender. If there is any doubt, always make your final mortgage payment. You will be reimbursed for any monies you’re owed at the closing. Making the payment will ensure you don’t have any negative credit ramifications.
Let’s examine everything you should know about making your final mortgage payment.
1. Understanding Your Mortgage Balance
The first step in selling a home with a mortgage is understanding your current mortgage balance. This balance is the remaining amount you owe on your loan, which decreases over time as you make payments.
To determine your exact mortgage balance:
- Check Your Mortgage Statement: Your monthly mortgage statement includes a breakdown of your principal balance and any accrued interest. It is essential to know this is an approximation.
- Contact Your Lender: I recommend you contact your lender directly for the most accurate and up-to-date information. They can provide a payoff quote that includes the principal, interest, and any additional fees due.
Knowing your mortgage balance is crucial because this amount must be paid off in full upon selling your home. It also ensures you can set a realistic selling price that covers the mortgage and selling costs.
2. The Mortgage Payoff Process
The mortgage payoff process is a crucial part of selling a house. When you decide to sell, you must request a payoff statement from your lender. This document will outline the total amount required to pay off your mortgage ultimately, including:
- Principal Balance: The remaining amount of your loan.
- Accrued Interest: Interest that has accumulated since your last payment.
- Fees: Any additional costs, such as prepayment penalties or late fees.
The payoff amount must be paid in full by the closing date to release the lien on your property. The title company or lender’s real estate attorney typically handles the payoff process. They will ensure the lender receives the necessary funds from the sale proceeds.
3. Handling Mortgage Payments Near the Closing Date
Timing your mortgage payments around the closing date requires careful planning. It’s essential to continue making regular mortgage payments until the closing date, even if it seems like your house will be sold soon.
Here’s why:
- Avoid Late Fees and Penalties: Missing a payment can result in late fees, additional interest charges, and potential damage to your credit score.
- Ensure Smooth Closing: Having your mortgage up-to-date helps prevent any last-minute hiccups during the closing process.
If your payment due date is close to closing, consult your lender. They may advise you to pay as usual or provide guidance on any prorated interest you owe.
Unfortunately, I’ve had clients who skipped making their last mortgage payment, which damaged their credit. The payment was recorded as late and sent to the three major credit bureaus.
When selling a house, always make a final mortgage payment if the due date is before the closing.Click To Tweet4. Consulting Your Lender and Real Estate Attorney
It’s crucial to consult with your lender and a real estate attorney before finalizing the sale of your home. They can offer invaluable advice and ensure you comply with all legal and financial requirements.
Here’s why:
- Lender Consultation: Your lender can clarify the payoff process, explain any fees or penalties, and offer advice on handling final payments. They can also answer questions about how the sale will affect your credit score and future borrowing capacity.
- Real Estate Attorney: A real estate attorney can review all contracts and documents related to the sale. They ensure that your rights are protected and that the sale is legally binding. They can also help resolve any disputes or issues during the transaction.
These consultations can prevent costly mistakes and ensure a smooth transition from one property to another.
Dave Van Nus, Portland Premiere Keller Williams Realty, offers this advice:
Getting a mortgage payoff from your lender or attorney is a crucial step when selling a property, and these figures can change throughout the month. You want a solid and accurate figure for escrow so the exact amount is funded when necessary. This is the exact remaining balance of your mortgage and is usually suitable for 30 days. Once your lender knows you are selling, they can freeze any additional interest until a specific date so escrow can pay this off with the funds supplied by the buyer.
This allows proper fund disbursement, transparency, and the prevention of closing surprises. The last thing you want at the final signing is to realize you own more than expected because of some silly slip-in, not getting the correct figures when needed.
Conclusion
Selling a home with a mortgage involves careful planning and attention to detail. As I have covered, you must understand your mortgage balance, handle the payoff process, manage payments near the closing date, and consult with professionals.
Following these steps can ensure a smooth and successful sale. If you have already paid off your mortgage, you’re golden! Please contact me if I can answer any questions or if you need help selling a home in the Metrowest, Massachusetts, area.
About the Author: Bill Gassett, a nationally recognized leader in his field, provided the above real estate information on when you stop making mortgage payments when selling a house. Bill has expertise in mortgages, financing, moving, home improvement, and general real estate.
Learn more about Bill Gassett and the publications in which he has been featured. Bill can be reached via email at billgassett@remaxexec.com or by phone at 508-625-0191. For the past 38+ years, Bill has helped people move in and out of Metrowest towns.
Are you thinking of selling your home? I am passionate about real estate and love sharing my marketing expertise!
I service Real Estate Sales in the following Metrowest MA towns: Ashland, Bellingham, Douglas, Framingham, Franklin, Grafton, Holliston, Hopkinton, Hopedale, Medway, Mendon, Milford, Millbury, Millville, Natick, Northborough, Northbridge, Shrewsbury, Southborough, Sutton, Wayland, Westborough, Whitinsville, Worcester, Upton, and Uxbridge Massachusetts.
