How to Sell a House When the Mortgage Hasn’t Been Paid Off in Michigan
Many homeowners think they must fully pay off their mortgage before selling their house. This is not true. You can sell your home in Michigan even if you still owe money on it. In fact, most home sales involve properties that still have active mortgages.
Understanding how the process works can help you avoid delays, reduce stress, and make better financial decisions. This guide explains how to sell a house with an unpaid mortgage step by step.
Can You Sell a House With an Existing Mortgage?
Yes, you can sell your home while the mortgage is still active. When the sale closes, the remaining loan balance is paid directly to your lender using the buyer’s funds. After the loan is paid, the lender removes the lien from the property so ownership can transfer to the new buyer.
As long as the sale price covers what you owe, the process is usually smooth.
Get Your Mortgage Payoff Amount
Before listing your home, contact your lender and request a mortgage payoff statement. This document shows the exact amount needed to fully pay off your loan. It usually includes:
Remaining loan balance
Accrued interest
Possible prepayment fees
Closing-related charges
The payoff amount is often slightly higher than your normal balance because interest adds up daily. Knowing this number helps you set the right price and avoid surprises at closing.
Find Out How Much Your Home Is Worth
Next, determine your home’s current market value. You can do this by:
Checking recent home sales in your area
Using online home value tools
Asking a real estate agent for a price estimate
Ordering a professional appraisal
Compare your home’s value to your mortgage payoff amount.
If You Have Equity
If your home in Michigan is worth more than what you owe, you have equity. This means you can pay off the mortgage and still receive profit from the sale.
If You Owe More Than the Home Is Worth
If your loan balance is higher than your home’s value, you are considered underwater. In this case, you may need to explore options such as a short sale or lender negotiation.
Choose the Best Way to Sell
There are several ways to sell a house with an unpaid mortgage. The right option depends on your timeline and financial situation.
Traditional Home Sale
Selling with a real estate agent is the most common option. The agent markets your home, finds buyers, and helps manage negotiations. After closing, the mortgage is paid automatically from the sale proceeds.
Sell to a Cash Buyer
Cash buyers and real estate investors often close faster and purchase homes in as-is condition. This option works well if you need a quick sale or want to avoid repairs. However, offers may be lower than market value.
Short Sale Option
If your home is worth less than your mortgage balance, a short sale allows the lender to accept less than what is owed. This process requires lender approval and additional paperwork, but it can help avoid foreclosure.
Account for Closing Costs
When selling your home in Michigan, remember that selling expenses will reduce your final profit. Common costs include:
Real estate agent commissions
Title and escrow fees
Transfer taxes
Repair credits
Outstanding property taxes
Include these expenses when calculating how much money you will receive after the sale.
Work With Your Lender During Closing
After you accept an offer, your lender will coordinate with the title company or closing attorney. They will provide the official payoff amount.
At closing:
The buyer’s payment is processed
Your mortgage is paid off
The lien is removed
Ownership transfers to the buyer
You receive any remaining funds
In most cases, you do not need to send extra payments while the sale is pending unless your lender requests it.
What If the Sale Price Is Lower Than the Mortgage?
If your home in Michigan sells for less than what you owe, you may need to:
Bring money to closing
Ask the lender to approve a short sale
Negotiate repayment options
Each lender has different policies, so early communication is important.
Tips for Selling a House With an Unpaid Mortgage
Follow these tips to avoid delays and problems:
Request your payoff amount early
Price your home correctly
Keep mortgage payments current
Respond quickly to lender requests
Work with experienced professionals
Good preparation can make the sale faster and easier.
Conclusion
Selling a house in Michigan when the mortgage has not been paid off is common and completely legal. In most cases, the remaining loan balance is paid automatically during closing using the buyer’s funds.
Even if your home is underwater, options such as short sales or selling to cash buyers may still allow you to move forward.
The key is understanding your loan balance, knowing your home’s value, and choosing the best selling strategy. With the right planning, you can sell your home successfully and move on with confidence.
