What Happens to Your Mortgage After Your Home is Sold?

A lot of questions may come to your mind when it comes time to sell your home. However, many home sellers like you are generally more concerned about the amount of profit they’re going to receive after selling off their house, while there are others who wonder as to what will happen to their mortgages that they’ve got on their properties after selling them.

What is the Significance?

Normally, mortgage payments constitute three different parts – the principal loan amount (it is used to build your home’s equity), the escrow account and the rate of interest. At the time of selling your home, the most important thing would be the principal balance amount. As a homeowner, you’ll reduce the principal loan amount over time, while the value of your home appreciates, thereby helping you to build equity in it by the time you decide to sell.

What are the Types of Mortgages?

There are three basic kinds of mortgages:

  1. FHA
  2. VA
  3. Conventional

Each of these mortgages, however, have the same fundamental rules for payments once the transaction has been closed successfully. Charges will differ from lender to lender, though.

What if Your House is Under Contract?

Your immediate next step after receiving a successful offer would be to accept the contract at the time of selling your home. At this juncture, all the necessary documents will go to the title company. It is the title company that will act as the mediator and a disinterested third party to the deal – ensuring both parties receive a fair deal. It’ll also coordinate both the closure as well as transfer of the property from you to the buyer.

How is the Payoff Made?

It is the title company that’ll gather all the information from you in order to source the payoff information from the lender. After that, the lender will send a statement of account in which he/she will reflect the amount of mortgage balance owed to you and add any sort of prepayment charges, if applicable. That statement of account will then be sent back to you to get your feedback. At this time you’re allowed to contest any discrepancy in the lender’s record and vice-versa.

How Are Funds Secured for the Transaction?

During the house sale process, it is the title company who’ll submit the mortgage loan for financing from a new lender, after you (the home seller) and the buyer have signed the closing papers. As soon as the funds have been sent to the title company for disbursement, an electronic transfer of funds will be done by your lender in order to pay back the remaining loan balance in full. After having paid back your mortgage debt and other real estate costs, any remaining amount will be sent to you via a check or electronic transfer.

What Other Factors Will You Have to Consider?

During the initial five to seven years of the mortgage loan, a major part of the monthly payment is used to pay off the interest. However, once that first five years is over, then it is the principal loan balance that decreases rapidly, thus putting you (the home seller) in a better equity position. This will help you to get a higher amount of net proceeds. Therefore, after the initial five years of your homeownership, itcan be a viable option to put your house for sale.

You can get detailed & more valuable information on mortgage from Mortgagefit website.