Accept the All Cash Offer Confidently, Even With Your Home Mortgage

So you’re ready to sell your house and should feel relieved to receive a cash offer.

With this buyer, you won’t have to deal with variables from their lenders that are out of your control. You avoid the headaches of the buyer’s mortgage application process hitting obstacles, slowing the sale, or an appraisal coming back too low, shutting down the deal completely.

Although the buyer is bringing cash to the table, you still have a mortgage you’ll want to pay off.

How Do You Pay Off Your Mortgage?

When deciding whether to take the cash offer for your house, understand your mortgage’s specific terms and how those affect the steps needed to complete the sale.

As you made a large investment when you took on your mortgage, understanding its terms can be intimidating. To simplify it, the mortgage payoff process remains generally the same, regardless of the type of buyer.

In a real estate transaction where the seller has a mortgage, a third party handles transferring the funds for the payoff, such as an escrow company, an attorney or a title company.

We’ll dive further into this process and other considerations that can help you manage your mortgage when selling your house and simplify the sales process.

Understand how to pay off your mortgage with an all-cash offer on your house:

• The Fees and Terms of Your Mortgage
• What Happens After Accepting an All Cash Offer

The Fees and Terms of Your Mortgage

The specific terms of your mortgage can impact the steps you’ll need to take in selling your house. They shouldn’t impact the type of offer you accept, beyond ensuring the offer covers the costs of the sale.

Due-On-Sale Clause

Most importantly, find out if there is a due-on-sale clause, which means your mortgage needs to be paid off when you sell your house. In this case, you’re required to notify the lender that your house has sold, should you accept an offer, and then you are required to pay off your mortgage completely before transferring the house to the buyer.

Although it might not be required, it can help you prepare for closing if you contact your lender before you accept an offer, to make sure you’re meeting their requirements for the sale.

Payoff Amount

When contacting your mortgage lender, you’ll also need to request the payoff amount of your mortgage. Use this amount to finalize numbers with the buyer and accurately know your financial position after the sale. The payoff amount is typically valid for up to 30 days. Keep in mind that this will change after that time, as it accounts for interest.

Prepayment Penalties

Also look into whether your mortgage has prepayment penalties. Sometimes lenders charge you a fee for paying off your loan early, as many mortgages are set for 15 to 30 years.

The above terms exist to protect the lender’s investment in your house. Beyond these terms, your lender doesn’t control other aspects related to the buyer you work with, including whether the buyer pays all cash or uses their own mortgage.

Consider This

Depending on the terms of your mortgage, you don’t always need to pay off the mortgage to be able to sell your house.

If your mortgage isn’t paid off through the transaction, you’re lender might allow you to continue paying the loan until it’s paid off. Another option is to refinance the mortgage for more affordable payments. Or if you’re approved for short sale of the house (a rare possibility if, for example, the mortgage is higher than the value of the house), the lender will take the hit for the remaining balance and take what they can get from the sale.

What Happens After Accepting an All Cash Offer

There are certain steps and costs within a real estate transaction that cannot be avoided, cash sale or not. With a cash sale, however, you and the buyer have more say in the steps that will be needed, as there are no lender requirements from the buyer’s side.

Whether you use an escrow company, realtor, or an attorney, be prepared to handle the subsequent requirements and costs, working with the buyer to cover them appropriately.

Below are the steps you’ll need to take to close on the sale:

• Terms must be agreed upon for the property’s title, such as whether it needs to be cleared from any loans against it, such as your mortgage, before transferring it to the buyer.
• The third-party that will transfer funds to pay your mortgage will need your payoff amount and mortgage account number.
• All documents will need to be signed and filed with the county or city to close the sale.
• The third-party can then send your final mortgage payoff amount and transfer the title to the buyer.

This quick questionnaire will help connect you to a Bolt & Beam expert who can get you introduced to the instant cash offer process:

Tax Considerations

In relation to the costs associated with selling your home, find out if you or the buyer are required to cover property taxes surrounding the sale of the house.

If through the sale you receive cash after you pay off your mortgage, find out if this profit falls under the capital gains tax, to know if that income is taxed.

Accept the All Cash Offer If It Meets Your Price Needs

There are several factors to consider before accepting cash for your house. Your mortgage doesn’t have to be a factor that holds you back when you understand the terms for paying it off.

Most importantly, communicate with your mortgage lender, ask questions and understand your mortgage’s terms to know what is needed so that you can accept the cash confidently and transfer your home to a new buyer.