What Happens to Your Mortgage When You Sell Your House?

When you sell your house, your mortgage gets paid off at closing. The title or escrow company uses the buyer’s funds to pay your lender the remaining balance, along with any other liens or closing costs, and you receive the remaining net proceeds. You don’t need to pay off the loan before you list, and in most sales the buyer doesn’t take over your mortgage. For years, many homeowners put off selling because they didn’t want to give up a low mortgage rate. That’s changing. According to a Redfin analysis of Federal Housing Finance Agency data, more mortgaged homeowners now have a rate of 6% or higher (21.2%) than a rate below 3% (20%), the first time that’s happened in five years. As the mortgage rate lock-in effect begins to ease, more owners are considering selling and asking what happens to their mortgage at closing. Key takeaways Your mortgage is paid off at closing. The title or escrow company uses the buyer’s funds to pay your lender in full, and you keep the equity that’s left after closing costs. Keep making payments until the sale closes. Your payoff amount includes interest owed through the closing date, and any leftover escrow balance comes back to you after payoff. FHA, ...