Asked by: Silva Preisendorfer
real estate real estate buying and selling

What happens if your house sells for less than you owe?

Last Updated: 26th March, 2020

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In a short sale, your mortgage lender agrees to let you sell your home for less than what you owe. If your lender rejects an offer, your sale will fall through. Some lenders won't even consider a short sale. A short sale will also cause your credit score to fall.

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Considering this, can you sell a house if you still owe on it?

If you still owe $430,000 on your mortgage but you elect to sell the property now, you will still have $30,000 remaining on the mortgage that you will need to pay off. Negative equity can be caused by a number of factors, including: Falling house prices.

Subsequently, question is, what happens to your mortgage when you sell your house and buy another? When you sell your home, the buyer's funds pay your mortgage lender and cover transaction costs. The remaining amount becomes your profit. That money can be used for anything, but many buyers use it as a down payment for their new home. Your loan is repaid to your mortgage lender.

Simply so, can you sell a house with negative equity?

Selling your home when it's in negative equity will break your mortgage terms, will be expensive and should only be an option if you're in severe financial trouble. You will need your mortgage lender's permission to sell the property if you know you won't get enough from the sale to pay back what you owe.

What happens if your house goes into negative equity?

Normally if you move house, you use the money you get for your current property to repay the mortgage and act as a deposit for the next property. But that's not possible if you're in negative equity - you'll still owe some money on the original mortgage, and won't have any funds from the sale to use as a deposit.

Related Question Answers

Neu Bailo

Professional

Should I sell my house at a loss?

One reason to sell at a loss is the need for money to buy another house. Think about how badly you need to move, or how much you would regret passing up the other house. If housing prices appear to be declining, then you should take the offer now rather than risk taking an even bigger loss when you sell your home.

Leida Kuchenbecker

Professional

Why has my property value dropped?

Another threat to the value of your property are foreclosures and short sales in your neighborhood. These affect your property value by skewing the comparable sales in your neighborhood down. Having short sales and especially foreclosures on your street decreases the value of your home.

Shasta Kaspersen

Professional

How do I sell my house and buy a new one?

If you want to know how to buy a house before selling your current house, follow these steps:
  1. Start house hunting right away.
  2. Make an offer on your dream home and request an extended closing.
  3. If you have savings, you may use that to purchase the home.
  4. Close on the new home.
  5. Consider renting your old home until it sells.

Delmiro Paganowsk

Explainer

What happens to equity when you sell your house?

If you sell your home and it has equity, meaning the price you sell at is higher than the mortgage remaining on the property, then the money the purchaser pays you for the propery goes to pay off the remaining mortgage and any other fees owing (including commissions), and any balance left over (equity) is what you

Adelaide Jargstorff

Explainer

Can you sell a mortgaged house?

Selling your property while in mortgage is a fairly common thing. Being in mortgage simply means you still owe money to your lender and have not yet satisfied your home loan. Typical mortgages run 15 to 30 years, and homeowners regularly sell their homes to move before loans are paid.

Deysi Baichoroff

Explainer

Do I get my down payment back when I sell my house?

No you don't get your down payment back specifially or guaranteed, and people do not take over your payments, not in general at least. You sell the house not the mortgage. The new buyer gets their own loan/mortgage. You have to pay 6% of so of the money the house costs to the Real Estate company who sells the house.

Regulo Aldeoo

Pundit

Does negative equity hurt your credit?

He also points out that, just because you get into a negative-equity situation with your car loan, it won't necessarily affect your overall credit score, but it could affect your purchasing power, and it could impact the auto loan rate you get for your next loan.

Aymen Vikhirev

Pundit

Can negative equity be written off?

Negative equity can also be a problem if your car is stolen or written off following an accident: insurance companies will usually only pay out the market value of a vehicle at the time of the claim. If the loan balance at the time is higher than this value, you may again be obliged to make up the difference.

Wenlong Cherry

Pundit

How can I get out of negative equity?

How to Get Out of an Upside Down Car Loan
  1. Refinance if Possible.
  2. Move the Excess Car Debt to a Credit Line.
  3. Sell Some Stuff.
  4. Get a Part-Time Job.
  5. Don't Finance the Purchase.
  6. Pretend You're Buying a House.
  7. Pay More Than the Specified Monthly Payment.
  8. Keep Up With Car Maintenance.

Evelina Coghlan

Pundit

Can you sell your home if you owe more than it is worth?

The majority of sellers still owe on their properties, but if you owe more than the home is worth, you could have difficulty getting enough money for it in a traditional sale. What happens if you sell your house and still owe money?In most cases, you will still be responsible for the rest of the loan amount.

Sandor Chepelkin

Pundit

What happens when your house loses value?

When you owe money on your real estate, it can increase the impact of a loss of value. When a $550,000 house goes down to $450,000, it has lost 18.2 percent of its value. However, if you have a $400,000 loan on the property, your equity will go from $150,000 to $50,000 -- a loss of 67 percent of your equity.

Amrik Urtasun

Teacher

What do I do if I have negative equity?

What to do if You Have Negative Equity
  1. Option 1: Keep the Car and Pay Off the Loan. The smart thing to do when you're upside down is to simply keep the vehicle and pay off the loan.
  2. Option 2: Pay Off the Negative Equity.
  3. Option 3: "Roll Over" the Negative Equity into New Loan.

Ninel Berasain

Teacher

What does upside down mean in real estate?

An upside-down mortgage is simply a mortgage in which the owner owes more than the house is worth. If you can afford the monthly mortgage payments and don't want to move, being upside down may not have an immediate effect.

Lashay Dubelt

Teacher

How do I know if I'm overpaying for a house?

Here are the biggest signs you're overpaying on a house:
  • The listing price is drastically different from other comparable homes in the same or a similar neighborhood.
  • The home has spent a long time on the market.
  • The home has hidden maintenance or foundational problems you didn't know about.

Iryna Chamero

Teacher

Should I sell my house before buying a new one?

When you sell your home before buying a new one, you know how much money you have to work with. It's also easier to get a new mortgage when you've sold your old home. You won't have two mortgage payments holding you back. Logistically, selling first is usually the best way to go.

Malinda Timoner

Reviewer

How do I get rid of a house that won't sell?

Do not despair because there are still actions you can take when your home does not sell.
  1. Postpone Selling Your Home.
  2. Consider Taking Out a New Mortgage.
  3. Rent Out Your Home Instead.
  4. Consider a Short Sale.
  5. Offer Your Home on a Lease Option.
  6. Ask Your Employer About Relocation.
  7. Lower the Price to Under Market Value.

Ely Gerardi

Reviewer

Can I get a mortgage if I haven't sold my house?

If you do not qualify for a standard residential mortgage then you may still be able to arrange a bridging loan. These can be secured either against your existing home or both properties and again would be repaid upon sale. They tend to be more expensive than a normal mortgage because of their short term nature.

Miles Dauber

Reviewer

Is it a buyers market or sellers market?

Buyer's market is commonly used to describe condition in real estate markets, but it can apply to any type of market where supply exceeds demand. The opposite of a buyer's market is a seller's market, a situation in which demand exceeds supply.

Fall Silvestro

Reviewer

Can't sell my house but want to buy another?

Below are some of the more popular alternatives you can take when your property just won't sell.
  1. Wait to sell.
  2. Find renters.
  3. Rent to own.
  4. Change your real estate agent.
  5. If you are relocating for work, inquire about a guaranteed purchase program.
  6. Consider another mortgage.
  7. Sell for less than market value.