Many people wonder what the steps are to sell a mortgaged home. After all, in Spain mortgages are signed for 20, 30, or 40 years: in that time life circumstances will likely change, and we will have to sell the home while there is still a pending mortgage. Do you want to know everything you need? Well, do not stop reading this article.
Can you sell a mortgaged apartment?
A common question, and clear answer: of course yes. In reality, it is a much more normal process than is believed, especially in the sale of second-hand apartments, and relatively simple if you are clear about the steps to follow. What’s more, you can sell a property with a pending mortgage loan in the same conditions as if you didn’t have it.
Posting a home with an outstanding mortgage up for sale may appear to scare off potential buyers at first. Nothing is further from reality. These types of products are usually seen as an opportunity since they tend to sell at a lower price than new homes or free of charge.
What are my options?
First of all, you have to be clear about several things: firstly, how much the home cost you, secondly, what is the amount of the mortgage that you have left to pay, and finally, at what price will you be able to sell the property. Once your accounts are done, you can decide between all the options you have to sell your house with a mortgage. Which are? Well, you have three possibilities, which we explain in detail below.
Cancellation of the loan for the sale of housing
This is the most common option. We will have to ask the bank for a certificate of pending debt (which shows the payments, the pending mortgage, and the cancellation costs), and fill out the Documented Legal Acts form. This is where two key factors come into play in this operation: the price for which we have sold the property and the outstanding mortgage debt.
If we have been able to wait for the most opportune moment and sell our apartment above the debt that we had with the bank, the mortgage is canceled before the notary in the same act of the deed of sale, so that the buyer you know you are buying a property free of charge.
A part of the check you receive for the sale of the home will be used to pay off the outstanding mortgage debt; In this case, we will have to pay -if there is one- the corresponding cancellation commission. The other part remains as a benefit of the operation – it is called capital gain and is subject to taxes – and we can enter it into our private account. It is the buyer who must register the cancellation of the debt in the Registry.
If, on the other hand, you have had to sell your home for a value lower than the loan that you had left to pay, the procedures are the same but the amount of the check must go in full to pay off the mortgage debt. We will then have a new debt with the bank but it will no longer be a mortgage, but a new bank loan with its conditions and clauses.
Mortgage transfer to the buyer
Another option we have when selling a mortgaged house is to transmit the pending debt to the home buyer: it is what is called a mortgage subrogation, and to carry it out it is recommended that the operation has the approval of our bank, which will study the risk profile of the new buyer. This study and its expenses are usually borne by the seller, as well as possible subrogation commissions.
It is also a fairly common option since the buyer saves the opening commission costs and you get rid of a house with a mortgage without having to pay cancellation fees. In addition, you do not have to pay the Tax on Documented Legal Acts either. However, there are clear disadvantages, such as that the buyer must assume the conditions of the previous mortgage and cannot negotiate new ones with the bank.
If the bank does not approve the profile of the new buyer – or does not respond – you have the option of carrying out the operation – unless a clause prevents it – by making a debt contract with the buyer, who must pay you the mortgage every month. However, you run the risk that it stops paying you, in which case you should face double litigation: one to claim the debt and the other with the bank … because it will be you who will claim the payments.
The bridge mortgage
This is a third possibility we have when selling a home with an outstanding mortgage loan. It is a not very common operation, which arises from the need that sometimes happens to buy a home through a mortgage while we are trying to sell another mortgaged home that we own (for example, by moving to live in another city).
What does this formula consist of? Instead of paying two mortgages separately at the same time, the bank offers us the possibility of unifying them into one by paying a monthly fee less than the sum separately, with the obligation to sell the first property being a term that can go from 6 months to 5 years.
It is a possibility that offers flexibility and comfort since we do not have to apply for another mortgage; Once the house we want to get rid of is sold, the bridge mortgage and the first mortgage are canceled, and a new normal mortgage is formalized for the new property. It may happen even though the sale is delayed and we cannot face the necessary time to pay the unified mortgage, so it is an option with risks.
Is it safe to sell a mortgaged home?
The main thing is to do accounts with enough time and calculate how much we have to pay on our loan, what price we pay for the purchase and how much we will get for the sale. From there, and once we know the steps to sell a mortgaged house, it is also important to choose the right time to sell, review the entire operation well, and have the necessary professional advice
