Selling House Before Mortgage Comes To An End

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This guide offers important explanations and advice on the process of selling your freehold or leasehold property before the mortgage comes to an end. There are no legal limits on being able to sell such a home, but there are some hurdles that you should understand before trying to find a buyer, in order to help secure a sale that is speedy and stress-free.

1. Can you sell your home before your mortgage is paid off?
2. Calculating whether it’s viable to sell your property with a mortgage
3. Fees you might have to pay selling a home before the mortgage ends
4. The process of selling your property with an existing mortgage
5. Porting your mortgage could be an option for some buyers
6. Options for selling your home before the mortgage comes to an end
7. Frequently asked questions about selling a home before the mortgage ends

Can you sell your home before your mortgage is paid off?

Many homeowners in the UK have mortgages, whether they own a house or flat or other type of property, and regardless of whether it’s freehold or leasehold. A mortgage is a home loan provided by a lender that makes it possible for people to buy their dream properties, and once the purchase is complete they will repay the loan with interest over a set number of years.

The average mortgage can range anywhere from 10 years to 35 years, according to The Mortgage Hut, which is a home loan advisor and broker. There is no obligation for paying off a mortgage early, and many property owners decide to simply see out the duration of the home loan before deciding on their next steps. Options can include living in the property with no more mortgage expenses, selling it, and various other steps.

However, if you want to sell a house or flat that you own but has many months or years left on the mortgage, is this possible? The short answer is that yes, it can be possible to sell your existing property before the mortgage ends, although it’s important to learn about restrictions and potential downsides.

The threshold fact that you will have to research before trying to sell your home with an ongoing mortgage is whether the sale will give you enough profit to pay off the loan. Even if you sell your property, you will still be legally obliged to meet the terms of your mortgage, including its monthly repayments. Most property owners who still have loans and sell their flats or houses use the proceeds to pay offer their mortgage, and cover any difference with their own money.

Calculating whether it’s viable to sell your property with a mortgage

Before you decide on whether to sell your house or flat that still has an outstanding mortgage, it’s important to calculate if the decision makes financial sense. Be sure to read the UK Government guidance on selling your home.

You should draft an honest budget for the sale of your property that includes an estimated sale price, along with any fees that you’ll have to pay the home loan company for clearing the mortgage early. You should also factor in any costs that you might have to pay depending on how you choose to sell your current property, such as commission owed to an estate agent.

The sale proceeds from your current home will first be used to pay off all of your existing mortgage, or as much of the remaining debt as possible. This is the crucial estimate that you should use before making a decision on selling, because it’s possible that your property might have dropped in value since buying it, and now it’s worth less than the outstanding total on the mortgage. If that’s the case, then you could be creating significant future financial problems for yourself because you’ll still owe the lender the remaining amount on your mortgage.

Even if you could make a slight profit on the sale of your home, that’s not necessarily reason enough to push ahead with finding a buyer for it. You’ll also have to consider the fact that you might be subject to fees for paying off your mortgage early, along with other charges.

The next section of this guide elaborates on the fees that you might have to pay in this situation, and you should calculate to see whether selling your home is the best choice to make.

Fees you might have to pay selling a home before the mortgage ends

In the event that you sell your home before the mortgage is paid off, there could be some fees that you’ll have to pay your lender as well as other costs of moving to consider.

Typically, home loans come with conditions that specify you’ll be subject to a financial penalty if you pay off the mortgage early. And if you sell a home that still has an ongoing mortgage, the sale proceeds will be used to first clear that debt, as well as pay any applicable fees. The exact terms and conditions will depend on what’s written in your mortgage agreement, so you should ask your solicitor for assistance in finding out what you’ll owe for any early payoff fees.

The reason why mortgage companies do not like you paying off a loan early is that they will lose out on money they would have made from the interest that you’d pay as part of your monthly repayment instalments that you agreed to when you took out the loan. And the type of mortgage that you have could also help you deduce the fees you may have to pay.

Standard variable rate mortgage

If you’ve got a standard variable rate mortgage then you will have made an agreement with your lender to be subject to an interest rate that could fluctuate each month, and the mortgage provider can change rates for many reasons.

Generally, these types of mortgage are not subject to fees for repaying the loan early, although you could still be subject to other charges such as an exit fee for ending the mortgage.

Fixed rate mortgage

As the name suggests, these mortgages are tied to fixed interest rate for a set period, usually between two and five years. You might want to wait until the end of the fixed rate period before you attempt to sell the property in order to avoid being subject to an early payoff fee.

If that’s not possible and you need to sell your flat or house before the fixed rate period has ended, you will likely have to pay your lender an early repayment charge. This fee could be as high as 5 percent of whatever was the value of your original mortgage. It’s possible that your loan agreement might state that this fee reduces in size with time, but this is not guaranteed. As always, check with your solicitor and lender for the specifics of the charges you might face.

Interest-only mortgage

Alternatively, you could have an interest-only mortgage on your property, where you just pay the interest on the loan each month and don’t pay down the actual core mortgage amount. Instead, you pay off the home loan at the end of the lending agreement. This type of home loan is usually the one that has the highest fees if you attempt to pay off the debt early.

Because of how interest-only mortgages operate, you will be expected to use the proceeds from selling your home pay off the entire loan at once, and this could be problematic in the event that your property has lost value and is now worth less to a buyer than the outstanding mortgage.

The process of selling your property with an existing mortgage

When you are ready to sell your home with a mortgage that hasn’t ended, you’ll find that many aspects of the selling process are just like selling any other type of property.

You’ll have to choose which method you would like to use for finding a buyer, such as selling on your own, using an estate agent, trying your luck with a property auction, or using a fast home buyer like LDN Properties. Later on in this guide we’ll explain the various pros and cons of those approaches, whereas this section focuses on some important information on selling generally.

Where the sale of a property with an ongoing mortgage differs from other home sales is during conveyancing, which is the point when a solicitor or other legal representative takes care of the often-complicated paperwork and financial transactions involved with finalising the sale. Your conveyancer will be the liaison between you and the company that provided the mortgage for your current home. Whenever you manage to sell your existing property, the conveyancer has the responsibility for ensuring that the proceeds from the sale are used to first pay off your ongoing mortgage.

As outlined in the previous section of this guide, there could be penalties to pay in addition to whatever amount you still owe on the mortgage, such as fees for paying the loan off early. The conveyancer will also use the proceeds from the sale to pay these fees to your lender, and any commission you owe an estate agent or auctioneer if you used them to sell your property. Once all of those debts are cleared, the conveyancer will give you the remaining proceeds.

If your home’s value has decreased since you bought it, you might be in a position where the proceeds will not clear the outstanding mortgage balance. If that’s the case, the entirety of the sale proceeds will be used toward paying off the loan, and you’ll be given a bill from your lender for what you have left to pay. You must work with the lender to agree on a timeline for paying off the remainder of the mortgage, otherwise they could try to sue you to recoup their money.

Porting your mortgage could be an option for some buyers

In the event that you are selling a property that has an outstanding mortgage but also purchasing a new home, you might be able to "port" your home loan to the next property. In general terms, porting can be seen as shifting your mortgage, including its terms and conditions, from one home to the next, although the actual steps involved are slightly more complex.

What changes is the fact that the loan will now be secured against your new home, instead of the property you’re selling. For this to happen, you will first repay whatever is outstanding on your current home loan for the existing property, and then the lender will issue a new mortgage for your next property that copies the conditions and terms of the first loan you had with them.

A huge advantage of porting your mortgage is that you will not be subject to paying any exit charges or fees for clearing the home loan early. This can be an ideal solution for many homeowners, because it can be a low-cost and straightforward way to proceed.

Options for selling your home before the mortgage comes to an end

After you have settled on selling your house or flat ahead of the mortgage being paid off, the next important decision you’ll have to make is which method of selling you would like to use.

Generally, people have the ability to choose between selling their home through an auctioneer, using an estate agent, on their own, or using a fast buyer like LDN Properties. You will find that there are advantages to each of the options, although some of them also have particular disadvantages such as taking many months or requiring you to pay expensive commission.

You should draft a budget for selling your home that considers all of the key aspects, such as how much money you can spend on the process, how quickly you need a sale, how much time and effort you have available to get involved with selling, and various other factors. With those elements in mind, consider the pros and cons of the four methods detailed below in order to identify the selling method that works best for your particular wants and needs when selling.

Selling your home through an auctioneer

Auctions can be a gamble, because you might not receive any bids on your home, in which case it remains unsold and you’ll have to start over with trying to find a buyer. Or you could just get a single bid at the reserve price, which is the lowest value at which you’re willing to sell. This is a legally binding agreement to purchase your property, so you must choose a reserve price that will generate a profit for the sale even after you have paid the auctioneer their fees.

The auctioneer will charge commission to pay for the work that they do in creating a listing for your home, which uses photographs and text to promote its best features. With the traditional method of auction, the listing will be advertised for a few weeks or longer and then the auction will occur on a specific day. With the modern method of auction, bids can be placed on the listing as soon as it is live, and the top bid at the expiration of the listing will be the winner.

There can be long wait times involved with selling this way, including several weeks between listing your home for sale and the auction taking place. And if your property does sell, the buyer usually has about 28 days to pay the proceeds and sign all of the legal documents for purchasing your property, and it can be even longer with some auction companies.

You’ll also have to pay the auctioneer commission that is typically calculated as a percentage of your home’s final sale price. This will be subtracted from your sale proceeds, which will lower your net profit. It’s possible that you might be able to transfer the obligation for paying some of the auctioneer’s fees to the winning high bidder, so it’s always worth asking companies about this option.

Selling your home using an estate agent

Alternatively, you might consider using an estate agent to take care of selling your home. They will produce the listing for the property and advertise it online, in local media and in their office, and also schedule and host viewings for potential buyers to tour your house or flat.

In exchange for doing this work, estate agents will make you pay commission usually based on your property’s final sale price. You’ll make a reduced profit selling this way, because that commission will be taken out of the final sale proceeds, and you’ll be left with the remaining amount – make sure it covers paying off your existing mortgage.

It can also take an extended amount of time to sell your property through an estate agent, and it’s not atypical for a property to remain unsold without any serious offers for many months, and possibly even more than a full year. Even if you do receive an offer, the pending buyer could rescind it and walk away from the sale anywhere up until exchanging contracts on the home.

And some estate agents are also known for telling you what seems like a great price for selling your home, even if they know that they will only be able to find a buyer at a reduced amount. They do this in order to convince you to sell your home with them, so that they’ll get the commission if it sells. You can easily avoid falling for this trick by asking for sale price quotes from multiple estate agents, as well as looking at the prices of properties like yours on home sales websites, and then averaging out those values for a more realistic property price.

It’s also advised to research estate agents online before selling, because this can potentially uncover negative customer reviews or news stories about a particular company that might dissuade you from using them to sell your home. Or it could produce good reviews and news coverage that could reinforce your decision to use a specific estate agent for your home sale.

Selling your home on your own

A third way to sell your house or flat would be to do so on your own, but this can be a very stressful process that is only recommended if you have any experience will selling a property, or if you have friends or family members that might be willing to help you with the sale.

You will be responsible for all of the time, money and effort involved with creating a listing for your property, advertising it, scheduling and hosting viewings, considering offers from buyers, and overseeing any serious offers hopefully through to exchanging contracts. It’s a huge amount of work and not something that you will likely be able to do in your spare time.

Perhaps the only clear benefit of selling your property on your own is that you won’t have to pay a third party like an estate agent any fees for finding a buyer. However, you can achieve the same outcome of not paying any fees by selling your home to a fast property buyer, which will help you to not only maximise your profit but also avoid all of the stress of selling on your own.

Selling your home to a fast property buyer

Quick home buyers, like LDN Properties, provide owners with a streamlined, zero-stress and hassle-free way to get speedy and competitive offers for selling their properties. LDN Properties, for example, has been buying homes throughout London for more than 15 years, and its team of friendly experts can consider purchasing almost any type, age, condition, shape or size of freehold or leasehold house or flat, along with commercial properties and plots of land.

Fast buyers have the financial resources available to immediately buy homes, which means that unlike other buyers they don’t have to wait several months to find out whether they’ll get approved for a mortgage to complete the purchase of your property. This means they’re able to finalise the entire process of buying your home in just a few weeks rather than months or longer. That’s ideal for those property owners whose top priority is making the quickest sale they can.

The trustworthy quick property buyers also never charge any fees, unlike estate agents and auctioneers who will make you pay commission for selling your home. Instead, you are guaranteed to receive the full proceeds of whatever sale price a fast buyer offers for your house or flat, which also makes this a perfect option for those owners wanting to maximise their profit.

Another advantage of using a quick buyer is that they have the ability to consider purchasing almost any type of home – even empty homes or those that might have features some other buyers could see as problems that would make them lose interest in the flat or house. For example, LDN Properties have knowledge of buying hoarder’s homes, houses with radon, properties with solar panels, homes that are located underneath noisy airport flight paths or close to busy railway stations, British Iron and Steel Federation houses, flats with cladding, properties where the owner has misplaced the title deeds or other important documents, unwanted inherited retirement homes, and more.

The process of selling your home to a fast buyer is simple; just call them and within the first hour of talking they should be able to make an offer on your property. There’s usually a full week to consider the offer, so there is absolutely no pressure to make an instant decision.

If you accept the initial offer, a representative from the fast buyer will often then visit your home so that they can inspect the interior and exterior. This is also a good time for you to ask any remaining questions that you may have about selling.

And the final stage is when the fast buyer works with your solicitor to complete all of the legal paperwork required as part of the sale. Typically, a fast buyer should be able to exchange contracts on your property and pay you the full proceeds all within a few quick weeks.

Top queries and answers about selling your house before the mortgage ends

Homeowners thinking of selling their home quickly typically have a range of questions for us, starting with how much repair work to do before selling through to selling a home in poor state of repair. Take a look at some of the leading questions we’re asked when selling before your mortgage ends: