What Happens When You Sell a Property with a Mortgage?
Firstly. let’s start from the beginning…
What is a Mortgage?
A mortgage is simply a type of loan where the property is used as security. A mortgage is generally used to help finance an investment property or home so that the buyer doesn’t have to outlay the entire amount. In return, the borrower pays interest along with the principle, in a series of repayments over the term of the loan.
Because the lender has a formal interest in the property, they have the right to sell the property and redeem their money, should the borrower default on repayments.
Home loans have allowed Australians to realize their dream of homeownership. In fact, according to the 2015 – 2016 Survey of Housing and Income, it was estimated that 37% of Australians have a mortgage on their property.
What Happens to My Mortgage if I Sell?
When the property is sold, the mortgage is discharged. In layman’s terms? That simply means that at the time of settlement, the balance of the loan is paid back to the bank.
For the bank or lending institution to discharge the mortgage, you must submit a formal application of discharge. It’s worth noting that once your application has been submitted, it can take several weeks for it to be processed, so get the ball rolling with your discharge as soon as possible once you have a firm settlement date.
Your lender will liaise with your solicitor or conveyancer to arrange discharge details for the settlement date.
Does a Mortgage Discharge Cost Money?
Yes. Generally, there are fees associated with the discharge of your mortgage, and these will be taken out at the time of settlement. If your mortgage is a fixed-rate loan, you may also incur break costs.
What Other Costs are Involved in Selling my Property?
Aside from paying out your lender, there may be other costs involved in selling a home too. These could include settling any outstanding utility accounts and council rates, real estate fees, documentation fees and solicitor’s costs.
Once all of these fees have been deducted, the balance of the funds will be transferred to your nominated account.
What Happens if the Property Sale Doesn’t Cover the Mortgage Amount?
This is an unfortunate situation that can occur, especially if the property market has dropped significantly since the homeowner purchased the property. In this case, the lending institution may request the borrower to make up the shortfall of funds through the sale of personal assets.
Is Now a Good Time to Sell in Melbourne?
In Melbourne, the property market remains strong and it’s an ideal seller’s market. Prices are still up, supply is outweighed by demand and consumer confidence is high.
Family homes in suburban areas are on buyer’s bucket lists – the pandemic has taught many Melbournians to value their personal space, and some people are choosing to continue with their work-from-home arrangements.
Yes, the looming federal election may cause buyers to be a little more hesitant, but keep this in perspective: for the past two years, real estate has been moving at a dizzyingly fast pace and overall predictions for this year are positive.
Take Your Time about Choosing a Good Team
We get it, your real estate agent is responsible for ensuring that you get the best bang for your buck when it comes to selling your property. And that’s where the team at Love & Co shine. We always put our clients first and are always prepared to go the extra mile to achieve the best outcome.
Want to know more about what’s involved in selling your home? Reach out to us here and talk to one of our friendly staff. We’re here to listen, help and support you every step of the journey towards your property sale.