Selling, still have a mortgage? Here’s what happens..
It is common to see Australians selling their property with a mortgage that they have not finished paying off. If you in this situation continuing reading
While you have a home loan on a property, the bank has the power to repossess the property if you fail to make your repayments. Once you sell your property and titles of the property are changed over the bank then loses the rights to repossess and therefore will ask for you to repay the money that they lent you.
What happens with your mortgage can go three ways depending on if you sell your house under or overvalue:
Selling under the value of your loan;
If you have sold your property under the value of your mortgage, your house might not be in the picture anymore, but your mortgage will be; you will still need to make your loan repayments at the same rate until the loan is 100% paid off.
This isn’t the ideal situation to be in; it is the same scenario if you had a loan on your car with no insurance; you had an accident, and your vehicle is undrivable- you would still have to continue paying for your vehicle.
To prevent this from happening we suggest you do your research ensure that any loan has a loan- to value ratio of 90% to minimums the chance of not being able to repay your mortgage and being forced to sell at under the mortgage value.
Selling over the value of your mortgage:
If you have sold your house for more than your mortgage this is excellent news, you have made a positive investment. You will still need to repay your bank the remainder of your loan before you negotiate a new loan term. Keep in mind there may be additional fees for the discharge of mortgage. These can include but not limited to;
· Conveyancing and lawyer fee- It is prevalent for clients to forget about the fees attached with legal teams; they take care of the paperwork when exchanges take place.
· Discharge request fees- You will find, most lenders will charge between $250 and $500 to process the discharge.
· Break Fees- Common with fix rate home loans, if you wish to pay off your loan early the lender will require you to pay a fee to do so.
This process can be simple, but we recommend allowing as much time as possible for your lender to process your application.
1. 1 month before settlement, notify the lender and submit a discharge of mortgage via your lawyer or conveyancer
2. Processing of discharge of mortgage usually takes the lender 2-4 weeks.
3. If submitting your new loan with the same lender, we recommend introducing your new mortgage application at the same time.
Selling without a mortgage:
Selling a house without a mortgage is as simple as it sounds. The entire value of the property goes directly to you on settlement.
If you have any more questions on what happens to your mortgage when you sell, please contact our team Derwent Finance.
Phone: (03) 6108 2110