Can I Sell a House with a Mortgage

Can I Sell a House with a Mortgage

Selling a house that still has a mortgage on it is a common and straightforward process in the UK. Most homeowners are still paying off their mortgage when they decide to move, and the system is designed to accommodate this. Whether you are upsizing, downsizing or relocating, having an outstanding mortgage does not stop you from putting your property on the market. However, it does mean that a few additional steps are involved in the sale, particularly around settling the remaining loan and managing timings with your lender.

Understanding how the process works will help you plan the sale more confidently and avoid surprises along the way. As long as the property value is sufficient to repay the outstanding mortgage balance or you have the means to cover any shortfall, you can proceed with selling just like anyone else.

What Happens to the Mortgage When You Sell

When you sell a home that is subject to a mortgage, the loan does not transfer to the buyer. Instead, the sale proceeds are used to pay off your outstanding mortgage balance on the day of completion. Your solicitor or conveyancer will request a redemption statement from your mortgage lender, which details exactly how much you owe including any early repayment charges or interest up to the completion date. Once the buyer’s funds are transferred, your solicitor settles the mortgage first and then passes any remaining amount to you.

If you are selling to buy another property, you may be able to port your mortgage. Porting means transferring your existing mortgage deal to your new home, which can be useful if you are on a favourable interest rate or wish to avoid early repayment penalties. Not all mortgages are portable, so you will need to check this with your lender early on in the process. Even if your mortgage is portable, you may need to go through an affordability assessment again and provide updated financial information.

If the sale price is lower than your outstanding mortgage balance, you will be in negative equity. This situation makes it more complex to sell, as you will need to repay the difference yourself. Some lenders may agree to a shortfall arrangement, but this usually requires approval and clear evidence of financial hardship. In most cases, it is advisable to wait until your equity improves before selling, unless the move is essential.

Informing Your Lender and Getting a Redemption Statement

As soon as you put your home on the market, it is sensible to contact your mortgage lender to let them know your intentions. They will not prevent you from selling, but they will want to stay informed and prepare for the upcoming redemption. Your lender will provide a redemption statement showing the amount required to clear your mortgage. This includes the capital owed and any fees, such as early repayment charges or administration costs.

If you are still within a fixed term or discounted deal, there may be penalties for ending the mortgage early. These charges vary depending on the terms of your agreement, but they can be significant, often amounting to a percentage of the outstanding loan. However, some lenders reduce the penalty the longer you have held the mortgage, and others waive fees if you are porting the loan to a new property.

Make sure the redemption figure is accurate and up to date. If completion is delayed, you may need a revised statement to reflect the new date. Your solicitor will handle the transfer of funds and confirm the mortgage has been cleared as part of the completion process.

Can You Sell with Arrears or Mortgage Difficulties

If you are behind on your mortgage payments or struggling financially, you can still sell your home, but the process needs to be handled carefully. In fact, selling the property may be a sensible way to avoid repossession and settle your debts. Inform your lender early and explain your intention to sell. In some cases, lenders will pause legal action if they know a sale is underway and the proceeds will repay the loan.

If you owe more than your home is worth and cannot cover the shortfall, you may need to discuss a voluntary sale agreement with your lender. This involves asking their permission to sell at a loss and entering into a repayment plan for the remaining debt. It is important to get independent financial advice in such cases to understand the implications and to ensure that the sale is managed correctly.

Legal Process and Timing

The conveyancing process for selling a house with a mortgage is similar to any other sale. Your solicitor will handle the legal paperwork, draft the contract, liaise with the buyer’s solicitor and ensure that the mortgage is paid off on completion. The key difference is the redemption of the mortgage, which must be factored into the completion day funds.

Timing is crucial, particularly if you are also buying a new property. Coordination between the sale and the purchase is essential to ensure funds move smoothly and you are not left with a financial gap. If you are not buying another property, the remaining funds after repaying the mortgage will be transferred to your bank account and can be used for your next steps.

Make sure your solicitor is aware of your mortgage status and any plans to port or repay early. They will request the redemption statement, deal with the Land Registry and ensure your lender removes the legal charge from the property once the loan is cleared.

Does Having a Mortgage Affect Attractiveness to Buyers

From a buyer’s perspective, purchasing a home with an outstanding mortgage makes no real difference. The mortgage belongs to the seller and will be cleared as part of the completion process. What matters more is the condition of the property, the accuracy of the title deeds and the general flow of the sale. As long as the mortgage is repaid properly and the legal steps are followed, buyers will not be impacted.

Buyers’ solicitors will check the title register to confirm that any charges or restrictions on the property are being removed on completion. This is a standard part of the process and ensures the buyer receives the property with a clean title.