Many North Carolina homeowners have successfully sold their houses with a mortgage and even made a significant profit.
In this guide, we’ll share how you can sell your home with a mortgage in North Carolina and all your best-selling options.
Can You Sell a House with a Mortgage in North Carolina?
Yes, you can sell a house with a mortgage in North Carolina. In fact, some banks prefer that you sell because they can receive a lump-sum payment when you close, rather than collecting monthly mortgage payments from you.
Paying off your mortgage happens during closing. When the buyer’s money comes in, your title company will pay off your mortgage as well as the closing costs and other fees the sale requires. Whatever is left is your profit.
Once your home sale in North Carolina closes, your mortgage disappears from the picture completely. It won’t follow you around as some homeowners assume. If you still have a significant mortgage balance before closing, it will affect how much you’ll end up with after the sale.
How to Determine Your Mortgage Payoff Amount in North Carolina
To determine your mortgage payoff amount in North Carolina, you have to ask your lender for an official payoff quote. This statement details what you owe, along with any interest and fees your lender may add.
You might be wondering why you need to call your lender when you can just print what’s online. The balance you see online may not be up to date. When selling, you’ll want an accurate number in the payoff quote. The customer service rep at your mortgage company is the only one who can provide you with an updated payoff statement. It’s usually valid for a specific period.
Positive Equity vs. Being Underwater on Your Mortgage House
Positive equity means your home has enough equity to cover your mortgage. For example, if your home value is currently $400,000 and you owe $250,000 on your mortgage, the $150,000 difference is your positive equity.
With positive equity, there’s a guarantee that you’ll walk away with a profit after you sell, even after your mortgage is paid off during closing.
Being underwater, on the other hand, means you have negative equity on your home in North Carolina. That happens when your mortgage balance is bigger than your home’s current value. Say, for instance, your home value dropped to $250,000, but you owe $300,000 on your mortgage.
When you have negative equity, you’re expected to cover the difference out of pocket. You’re ultimately selling at a loss. For homeowners with fixed-rate mortgages, a good strategy is to delay the sale and wait for the housing market to recover so they won’t experience any financial damage.
However, if you’re forced to sell in North Carolina due to foreclosure or refinance because the interest rate of your adjustable-rate mortgage skyrocketed, you may have to bring cash to closing to cover the shortfall.
How to Sell a Home with an Existing Mortgage in North Carolina
Selling a home with an existing mortgage is very common in North Carolina. Here are 5 key steps you should follow.
Step 1: Figure Out What Your House Is Worth
First, you have to determine your home’s current value. You can do this by calling up local real estate agents and asking them to do a comparative market analysis for you. Usually, they’ll do this for free because they want to be your agent.
They’ll check recently sold homes in your neighborhood similar to yours. They’ll use the MLS (multiple listing service) for this and pull the listings within a 1 to 3-mile radius. They only look at the data from the last 3 to 6 months to determine your home’s fair market value.
Aside from agents, you can also hire an appraiser if you want an official opinion on your home’s current worth. This costs a few hundred dollars, but it is usually more accurate.
We know it’s tempting to use online calculators to determine the fair market value of your home, but it’s not the best move. You’re after accuracy here.
Step 2: Get Your Mortgage Payoff and Net Proceeds
Next, call your lender for a mortgage payoff statement. As we’ve shared earlier, getting the payoff amount online is not official, and the data is almost always out of date. Once you have your total balance, subtract it from your home’s fair market value.
Then, subtract all closing costs, real estate commissions if you’re using an agent, and all other selling fees. Don’t forget bills tied to the house, too, like HOA fees, unpaid property taxes, and utility bills.
Whatever’s left after you make all those deductions is your net proceeds. This will determine if you’ll sell at a loss.
Step 3: Get the Property Ready for Home Buyers
If the numbers are in your favor and you’re ready to sell, your next move should be preparing your home for buyers. This means doing a deep clean, fixing broken doorknobs and hinges, swapping old lighting, and applying a fresh coat of paint. Basically, anything that will make your house look clutter-free and inviting.
We don’t suggest making expensive renovations at this point, like replacing your whole roof or remodeling your kitchen, because they typically don’t provide a good ROI. You just have to make your house feel move-in ready, and that’s enough.
Step 4: Pick the Right Method for Selling Your Home
There are five main options when selling a home with a mortgage in North Carolina. The best fit depends on your timeline and how much of the process you want to handle yourself.
Listing with a Real Estate Agent
Real estate agents know your local market and can help you price your property correctly. They’ll handle every part of the sale for you.
They’ll market your property, handle showings, negotiate with buyers, and guide you through the paperwork.
However, they ask 3% to 5% of the sale price, depending on how much work they put into it.
For Sale by Owner
“For sale by owner” (FSBO) means selling the property on your own. Many homeowners do this to keep the commission, but it’s a lot of work. You’ll do everything an agent does, like pricing your home, marketing, and coordinating showings.
You’ll also be in charge of negotiating, which may be difficult since you aren’t a neutral party in this sale. Your attachment to the property may cloud your judgment about what’s an acceptable offer and what isn’t.
FSBO is only suggested if you have a background in real estate, such as being a realtor, or if you’ve already sold a home on your own.
Seller Financing as an Alternative
There are 2 main ways you can do seller financing when selling a house with a mortgage:
- Subject to: The buyer takes over the ownership of the property, but the original mortgage is still under the seller’s name. The buyer pays the seller monthly, which the seller then uses to pay the bank.
- Closing payoff: You pay off the original loan using your buyer’s down payment and your personal funds. Then, you issue a new loan to your buyer for the remaining amount they owe.
These two seller financing options are more complex than the others. You should work with a qualified real estate attorney to ensure these are done right and that you and your buyer are both protected.
Selling Your House to a Cash Buyer
Selling to a company that buys homes in North Carolina is fast and hassle-free because the sale doesn’t go through a lender. This option is highly suggested for homeowners who are in a rush or want to sell as-is.
The downside is that cash sales can be 10% to 20% below market value because the repairs are accounted for. It’s still a great option if you have enough equity and want to sell your house fast for cash in Raleigh, NC, and nearby cities.
Short Sale When You’re Underwater
Short sales occur when you owe more than your house is worth, and the bank agrees to accept less than your original balance. This can take three to six months, sometimes longer, because the lender has to approve everything.
You should also know that your credit score will take a hit, though it’s not as bad as the impact of foreclosure.
Step 5: Close the Sale and Settle the Existing Mortgage
At closing, your title company will handle the funds and pay off your mortgage loan, along with the closing costs, fees, and commissions. You’ll sign a stack of paperwork at closing, the property transfers to the new owner, and your mortgage will be paid off.
Important Note: Your mortgage company will send you a document confirming that your loan is paid off. Keep this somewhere safe since it’s your proof that your financial obligation to the bank is already settled. You can use this document if the property sells in the future and there is a clerical error stating that your mortgage is still active.
Selling an Inherited or Probate Property with a Mortgage in North Carolina
Before you can sell an inherited or probate property with a mortgage in North Carolina, an executor or administrator should first be appointed by the local North Carolina county.
The executor or administrator will then inform the mortgage company of the homeowner’s passing so they can be paid from the estate’s proceeds once the sale closes.
Once the mortgage is paid off with the proceeds, the net profit is then distributed to the heirs according to the will. If there’s no will in existence, the profit is distributed based on North Carolina intestate succession laws.
Challenges When Selling a Mortgaged House in North Carolina
Here are some challenges that can slow you down or cost you extra money when selling a house with a mortgage in North Carolina.
You Have Multiple Mortgages or Liens on Your Property
Although your mortgage has priority over most other liens at closing, it can still be stressful if you have multiple liens on the property.
For example, property tax liens jump ahead of your mortgage at closing. If your tax debt is significant, it can affect how much will be left to pay off your mortgage. You can even end up underwater in extreme cases.
Keeping the Mortgage Payoff Valid Until Closing
Your mortgage balance changes daily due to interest. The payoff statement issued by banks can expire before closing. If your closing was delayed, you may need to request a new payoff statement from your lender, which will delay the closing timeline.
When Selling Costs Eat Into What You Walk Away With
The selling costs of a home sale in North Carolina are usually 6% to 10% of the final sale price. This includes agent commissions, transfer tax, title insurance, attorney fees, and other variable costs.
If you still have a significant mortgage balance, adding these hefty selling costs will consume most of your equity. You may need to delay the sale to wait for a better offer. And if one doesn’t come, you might need to negotiate a short sale.
Frequently Asked Questions
What happens when you sell with a mortgage?
When you sell with a mortgage, your loan balance is paid off during closing, along with all other selling fees. Your mortgage has high priority, so it’s paid before other liens on the property. After your loan is cleared, you’ll receive a lien release document that proves the mortgage has been satisfied.
How much tax do you pay when you sell your house in North Carolina?
When you sell a house in North Carolina, you’ll pay a transfer tax of $1 per $500 of the sale price. You’ll also owe federal and state capital gains tax, depending on how long you’ve owned the property. North Carolina charges a flat 4.25% on your capital gains; meanwhile, the long-term federal capital gains rate can range from 0% to 20% based on your income. As for short-term capital gains, you’ll be taxed at your ordinary income tax bracket.
What is the hardest month to sell a house?
December and January are arguably the hardest months to sell a house, even in North Carolina. Buyer activity drops due to the holiday season and winter cold. The days are also shorter, so buyers who want to view houses in natural lighting postpone their commitment.
Can you sell a house in North Carolina without a realtor?
Yes, you can sell a house in North Carolina without a realtor. You can go the FSBO route or sell to a cash buyer for a fast sale. However, you’ll want a strong grasp of real estate transactions because making mistakes at any point in the process can be costly.
Key Takeaways: Selling a Home with a Mortgage in North Carolina
You can sell your home with a mortgage in North Carolina if you need to. The remaining mortgage balance is paid off at closing, along with your other selling costs.
Before you list, calculate whether your equity is enough to cover your loan balance and closing fees. The result will dictate what selling method is the best fit for your situation.
Ultimately, cash buyers can be an excellent option when selling a house with a mortgage. Swift Cash House Buyer buys houses as-is, so you can sell fast and pay off your mortgage immediately. If you’re ready to sell to a cash buyer, contact us now at (610) 590-9845 to get your no-obligation cash offer.
Helpful North Carolina Blog Articles
