Selling a house with a mortgage, how do I do it?

The three ways to sell a house with a mortgage

1. Cancellation of the mortgage loan

This option has two possible scenarios.

If the home is sold at a price equal to or greater than the debt to the bank. This would be an ideal scenario in which the mortgage is cancelled immediately (the corresponding cancellation fee would apply). If an profit is obtained in the transaction, it would be considered capital gain and thus be subject to taxes.

If the home is sold at a price that does not cover the debt. In this case, we would cancel part of the mortgage, and the missing part would be considered a new bank loan, with different conditions.

2. Subrogation of the mortgage to the buyer

It consists of transferring the outstanding debt to the buyer. The bank would study the buyers profile to verify that the mortgage transmission is feasible. The advantage of choosing this option is that the seller does not have to pay the cancellation fee of the mortgage and that the buyer saves the opening commission.

3. Application for a bridge mortgage

A bridge mortgage is usually applied for when you need to buy a new home with a mortgage, while trying to sell another property that is still mortgaged. Moving to another city on short notice would be an instance in which to take up this option.

This possibility allows us to merge both mortgages, obtaining a lower quota in comparison to what would be paid if there existed two separate mortgages. The condition to do so, is to commit with the bank to sell the first property in the agreed term.

To know which option is the most suitable for your case, it is important that you crunch the numbers. You have to take into account how much the house cost you, what amount you have left to pay, and at what price you could sell the property based on the current market situation.