When moving, there’s a lot to consider, from finding a real estate agent to cleaning up your current house and looking for a new residence. However, one detail many overlook is mortgage payments. If you still have an outstanding balance on your home that you need to pay, you may be wondering, “When do you stop paying your mortgage when selling a house?”
To keep from adding on delinquency fees, our team at My Tennessee Home Solution (the only five-star home buyers in Tennessee who purchase homes as-is) is here to help. Below, we’ll discuss when you no longer have to pay your mortgage and what factors affect your final payment date.
Do You Keep Paying Throughout the Selling Process?
Many homeowners believe that since they won’t be in their current house for much longer, they don’t have to worry about paying off the mortgage anymore. However, a missed or late payment during this time still results in delinquency fees, and the lender (whether a bank, credit union, or insurance company) can seize the property. So, you must pay monthly until you’re no longer the homeowner.
Ask your lender for a payoff statement outlining your remaining balance and total mortgage interest. That way, you know how much of your sales proceeds will go toward your old mortgage balance, including interest, principal, early repayment charges, and any penalties you have on your debt.
Once the closing date comes, it becomes an official sale, and you no longer hold the property ownership title. There’s a release of lien, meaning you don’t have a legal claim on the house, so you can’t use it as collateral and don’t have to pay debts on it from then on. But what if you have a monthly payment due before your closing date: should you make one final payment or do the sale proceeds to handle this?
Understanding Your Grace Period
Most mortgage lenders have a set due date on the first of every month. That means they expect their borrowers to pay their monthly payment by this date but still offer a 15-day grace period, so you have until the 15th of the month to pay the bill without late fees. But depending on when your grace period ends and your closing date is, when do you stop paying your mortgage when selling a house?
When Your Grace Period and Closing Date Line Up
However, if your closing date is around the grace period deadline (from the 10th to the 15th), ask the lender whether you should skip the payment. If you must pay, do so between the third and eighth. Paying seven days in advance ensures the payment clears before the deed changes hands.
Also, if the payment was unnecessary, don’t worry about losing money since the lender sends out an overpayment refund within 30 days of your payment.
If You Have a Late Closing Date
If your closing date falls outside the grace period (after the 15th), make one final payment before transferring house ownership. You won’t risk penalty fees that’ll leave your lender asking for more from your sales proceeds.
If Your Closing Date Precedes Your Delinquency Date
Finally, if your closing date is early (the first to the tenth of the month), which is days before the mortgage delinquency date, you don’t have to worry about making the payment. The sales proceeds should have enough time to clear by the end of your grace period, and that will pay off your loan in full.
What If Your Sales Proceeds Don’t Fully Cover Your Mortgage Balance?
Everyone expects their sales proceeds to cover their mortgage, leaving enough funds behind so the seller can pocket the rest. However, if it’s time to move and you notice your outstanding mortgage costs are more than your house’s sales proceeds rake in, you have a short sale. You can try negotiating with your lender to accept less, but without your lender’s approval, you’ll have out-of-pocket payments.
For Five-Star Home Selling Assistance Today!
Our team has your finances in mind. Our specialists don’t ask for fees or commissions, and we buy your home as-is, so you don’t have to put extra funds into repairing and replacing household components. We also offer the highest off-market prices.
So, whether you want to learn about the foreclosure process in Tennessee or need answers to the question, “When do you stop paying your mortgage when selling a house?” call My Tennessee Home Solution at (615) 933-5431. We’ll give you a fair cash offer now!