When to Notify a Mortgage Company You're Selling Your Home
- Most mortgage contracts have a due on sale clause that is created to handle the sale of a home. Mortgages are set for long periods of time, ranging from 20 to 30 years. It is very likely that a homeowner will want to sell and move to a different house within that period of time, so lenders include this clause as security against the process.This creates a legal obligation that the seller must use the proceeds of the sale to fully pay off the lender, or at least pay off as much of the loan as possible.
- The due on sale clause may mention specific times when the lender must be notified of the sale arrangement, but usually lenders only become involved when homeowners are completely finished selling the house. When the transaction has reached closing and the seller has received payment, the seller can contact the lender and explain that they have the funds necessary to fully pay off the loan. The lender may know about the sale if the title company has sent it previous notifications.
- The payoff statement is a notification that the lender creates showing the borrower how much of the mortgage is left and how much will be required in order to fully pay it off. These statements can be useful because they account for both all the interest accumulated by the loan and any fees that may be associated with paying the loan off early. If sellers want this payoff statement to plan for ending their mortgage, they should contact their lender in advance of closing and ask for it.
- A mortgage assumption occurs when the seller transfers the mortgage debt along with ownership of the house to a new owner. This can happen if the remaining mortgage is small and the buyer wants the house badly enough to be willing to assume it. In this case the seller should notify the lender at the beginning of the transaction. The lender must be involved in every step of the process to successfully transfer the mortgage.
