Selling a Home

March 20, 2025

Can You Sell Your Home Before Paying Off Your Mortgage?

If you’re thinking about selling your home in Rhode Island but still have a mortgage, you’re not alone. The majority of homeowners sell before paying off their loan completely. But how does the process work? What happens to your remaining mortgage balance? And how can you maximize your profits while making a smooth transition?

In this guide, we’ll walk you through how to sell a home with a mortgage in Warwick, East Greenwich, Cranston, Providence, and anywhere in Rhode Island.

Can You Sell a Home Before Paying Off the Mortgage?

Yes! You can sell your home even if you still owe money on your mortgage. When you sell, the proceeds from the sale will first go toward paying off the remaining loan balance, and any remaining funds will go to you (after closing costs and fees).

How the Process Works:

✔ Get a mortgage payoff quote from your lender.
✔ List your home and accept an offer.
✔ Pay off the mortgage balance at closing using the sale proceeds (the attorney will handle this).
✔ Keep any remaining profit after closing costs.

Step-by-Step Guide to Selling a Home with a Mortgage

1. Determine Your Mortgage Payoff Amount

Before listing your home, contact your mortgage lender to request a mortgage payoff statement. This will show exactly how much you owe, including:

✔ Remaining loan balance
✔ Interest owed up to the closing date
✔ Any prepayment penalties (if applicable)
✔ Fees for paying off the loan early

📌 Pro Tip: The amount listed on your monthly mortgage statement is not your exact payoff amount—it’s just the principal balance. You need an official statement from your lender for the correct figure.

2. Estimate Your Home’s Value

To ensure you sell for the right price, you need to determine your home’s current market value.

✔ Request a Comparative Market Analysis (CMA): A Warwick real estate agent like Nick Slocum or one of The Slocum Home Team’s top agents can provide a detailed CMA based on recent sales of similar homes.
✔ Use Online Home Value Estimators: While these can give a rough estimate, they may not reflect local trends.
✔ Hire an Appraiser: If you want a certified valuation, an appraisal can give you a professional home value assessment.

3. Calculate Your Potential Profit

Once you know your home’s estimated value, subtract the following to estimate your net proceeds:

✔ Mortgage payoff amount
✔ Real estate professional service fees
✔ Closing costs (typically 1-3% of the sale price)
✔ Property taxes (prorated to closing date)
✔ Home repairs or improvements (if applicable)
✔ Any seller concessions negotiated with the buyer

💰 Example Calculation:

Estimated sale price: $450,000
Remaining mortgage balance: $300,000
Closing costs & fees: $15,000
Net proceeds: $135,000 (before taxes and moving costs)

4. List and Market Your Home

Once you’ve set your price, it’s time to attract buyers.

✔ Professional Photography & Virtual Tours: High-quality images make your listing stand out.
✔ MLS & Online Listings: Get maximum exposure by listing on Zillow, Realtor.com, and other major platforms.
✔ Social Media & Digital Ads: Target potential buyers using strategic Facebook and Instagram campaigns.
✔ Open Houses & Private Showings: Allow buyers to experience your home in person.

5. Accept an Offer and Move Toward Closing

When an offer comes in, your real estate agent will help you evaluate the terms and negotiate as needed.

✔ Review buyer financing: Cash offers or pre-approved buyers may result in a smoother closing.
✔ Negotiate contingencies: Home inspections and financing contingencies can impact the timeline.
✔ Set a closing date: Typically 30-45 days from the accepted offer.

6. Pay Off Your Mortgage at Closing

At closing, the title company or attorney will handle your mortgage payoff using the sale proceeds.

✔ Your lender will provide a final mortgage payoff statement.
✔ The title company will wire the payoff amount directly to the lender.
✔ Any remaining proceeds will be issued to you after closing costs.
✔ You’ll sign the final documents, and the home’s ownership transfers to the buyer!

📌 Pro Tip: Make sure to cancel automatic mortgage payments after closing to avoid unnecessary withdrawals.

What If You Owe More Than Your Home Is Worth?

If your mortgage balance is higher than your home’s value, you may be in a situation called negative equity or being underwater on your mortgage. In this case, you have a few options:

✔ Bring money to closing to cover the shortfall.
✔ Negotiate a short sale with your lender if you’re struggling financially and facing a hardship.
✔ Rent the home instead of selling until the market improves.
✔ Work with a real estate agent to explore creative selling strategies.

Selling a Home with a Mortgage? Let’s Make It Easy!

Selling a home with a mortgage is a straightforward process when you have the right guidance. Whether you’re selling in Warwick, East Greenwich, Cranston, Providence, or anywhere in Rhode Island, The Slocum Home Team is here to help you navigate every step and maximize your sale.