Q: I am in the process of selling my own home and have a year left on the mortgage. What happens now?
A: Congrats on selling your home and being close to paying off your mortgage! Those are two big financial wins.
When you sell a property that has a remaining mortgage, there are a few steps you need to take and things you should be aware of. Here are the big ones:
Contact your lender: One of the first things you should do is reach out to your lender to make them aware of your intent to sell your home. They’ll be able to provide you with some key information you need to move forward, including your mortgage payoff amount. The mortgage payoff amount will include your principal balance, accrued interest and any fees or penalties for paying it off early, which are common if you’re doing so during the first years of the loan.
How the closing process works: During the closing process, the amount being paid by the buyer will be transferred into an escrow account. Funds in the escrow account will be used to pay off your mortgage and cover closing costs (realtor fees, attorney fees, taxes, etc.). The remaining balance goes to you.
Releasing the lien: Once your mortgage is officially paid off, your lender will release the lien on your property. In other words, legal claim to your property will be transferred to the purchaser.
