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Selling a House With a Mortgage: What You Need to Know

If you’re wondering about selling a house with a mortgage, you’re not alone. In fact, most homeowners still owe money on their homes when they decide to sell. Whether you’re moving for work, upgrading to a new home, or dealing with life changes, it’s completely possible to sell—even if you haven’t paid off your mortgage.

The key is knowing what to expect, what steps to take, and how to make the process as smooth as possible. This guide walks you through everything in a clear, simple way.


1. Can You Sell a House Before It’s Paid Off?

Yes, you can sell your house before it’s fully paid off—even if you’re still making mortgage payments.

Yes—you absolutely can. Selling a house with an outstanding mortgage is very common. You don’t need to wait until your loan is fully paid before putting your home on the market.

Here’s how it works:

  • When you sell the home, part of the sale proceeds are used to pay off your remaining loan balance.
  • After that, any money left over is yours to keep (minus other selling costs).

Your mortgage company will usually provide a payoff amount—this is the exact total needed to pay off your loan in full, including any interest up to your closing date.


2. What Happens to Your Mortgage When You Sell?

If you have more than one loan, like a second mortgage or HELOC, this article explains what you need to know when selling.

At closing, your home’s buyer will pay the agreed purchase price. The title company or attorney handling the sale will then:

  • Use those funds to pay off your mortgage
  • Pay any remaining closing costs (agent fees, taxes, etc.)
  • Send you the remaining balance—your profit!

If your home sells for more than what you owe, you walk away with equity. If your home sells for less than what you owe, that’s called being “underwater” or “upside-down,” and you’ll need to consider a short sale or pay the difference at closing.


how to calculate mortgage

3. How to Calculate What You’ll Walk Away With

Before you list your home or accept an offer, it’s essential to understand what you’ll actually earn from the sale. Selling a house with a mortgage doesn’t mean you’ll walk away empty-handed—but your profit depends on a few key numbers.

Here’s how to calculate your net proceeds, also known as what you’ll walk away with after everything is paid:

Basic Formula:

Estimated Sale Price
Mortgage Payoff Balance
Selling Costs (typically 8%–10%)
= Net Proceeds (Your Profit)

You can get a more accurate estimate using online tools like NerdWallet’s Home Sale Calculator.

What to Include in Selling Costs:

  • Real estate agent commission: 5%–6% of the sale price (if you’re using an agent)
  • Title and escrow fees: Often shared between buyer and seller
  • Transfer taxes or recording fees: These vary by county in Michigan
  • Repairs or improvements: Optional, but factor them in if you’re making any updates
  • Staging or cleaning costs: If you’re prepping the home for traditional buyers

Request a Payoff Statement From Your Lender

Your lender can give you a “mortgage payoff statement,” which includes:

  • Your principal balance
  • Any unpaid interest
  • Fees or penalties (if applicable)
  • The total amount owed up to a specific date

Having this figure ahead of time gives you more control when negotiating offers.

Knowing your numbers upfront helps you make smarter decisions—and avoid surprises at closing.


4. Can You Sell a House With a Mortgage in West Michigan?

Absolutely—you can sell a house with a mortgage anywhere in Michigan, and West Michigan is no exception. In fact, it’s one of the most common situations we see in cities like Grand Rapids, Kentwood, Rockford, Holland, Jenison, and Belding. Whether you’re selling due to a job relocation, family needs, or financial reasons, you don’t have to wait until your mortgage is paid off.

In many cases, local buyers are especially helpful. Why?

Because they understand the market and can move quickly. If you’re working with a traditional agent, the process may involve some back-and-forth with your mortgage lender. But if you’re selling to a local cash buyer, it often goes smoother.

Here’s why homeowners in West Michigan often sell before their mortgage is paid off:

  • They’re relocating for work or to be closer to family
  • They’re upsizing or downsizing based on life changes
  • They want to avoid foreclosure or catch up on missed payments
  • They’ve inherited a home and need to resolve the mortgage balance

Working with someone local—like Hometown Development—can help you close faster, skip repairs, and handle all the coordination with your lender.


5. What If You’re Behind on Payments?

If you’ve already fallen behind on payments, this guide offers more in-depth help for understanding your options.

If you’re behind on mortgage payments, don’t panic—you may still have time to sell. The sooner you act, the more options you’ll have.

Here are a few things to keep in mind:

  • You may qualify for a short sale, where your lender agrees to let you sell for less than you owe.
  • You could use your home’s equity to pay off the missed payments at closing.
  • Selling to a cash buyer may help you avoid foreclosure entirely and preserve your credit.

If you’ve received a notice of default or are at risk of foreclosure, talk to your lender and explore selling immediately.


6. Why Working With a Local Buyer Makes It Easier

If the idea of selling while juggling a mortgage feels stressful, a local buyer can make it much easier.

Why?

  • They know the closing process and can work with your lender
  • They don’t need bank financing, which speeds things up
  • They often cover closing costs and skip inspections or repairs

At Hometown Development, our process is simple:

  1. You tell us about your home (even if you’re behind on payments)
  2. We give you a cash offer within 24–48 hours
  3. You choose when to close

We work with homeowners in Kent, Ottawa, Ionia, Muskegon, and nearby counties who want to move on without the usual selling stress.


7. Final Thoughts: Don’t Let Your Mortgage Hold You Back

Selling a house with a mortgage may sound tricky, but it’s totally doable. The key is understanding your numbers, acting early, and working with the right partner.

Whether you owe a little or a lot, you have options—and there’s no reason to wait if you’re ready to move.


💬 Ready to Sell? Even With a Mortgage, We Can Help

If you’re in Grand Rapids, Kentwood, Wyoming, Rockford, Holland, Grand Haven, Jenison, Hudsonville, Belding, Saranac, Muskegon, or Fruitport, reach out to Hometown Development for a fast, transparent home-selling experience.

We’ll help you handle your mortgage and close when you’re ready.

👉 Click here to request your free cash offer

How Does a Second Mortgage Work?

Second mortgages are a type of lien used on a property that is already attributed to a loan. They can be beneficial tools for some homeowners and a huge risk for others. If you’re considering a second mortgage on your home, it’s important to be prepared for what it means for your home and your financial future.

Here’s everything you need to know about a second mortgage, including what it is and how a second mortgage works.

What Is a Second Mortgage?

A second mortgage, similar to a traditional mortgage, is a loan that is taken out against your home as collateral. Since it is taken out after the purchase loan, it’s called a second mortgage. A second mortgage is also second in line to be repaid if your home is sold in the foreclosure process.

Some homeowners may be interested in taking out a second mortgage if they need to free up money to pay for things like unexpected repairs, bills, or fees. While taking out a second mortgage may be an option for many homeowners, it also comes with risks that are important to understand before making this financial decision. 

Let’s look at how a second mortgage works, some of the pros and cons of this type of loan, and some other options that may work for you if a second mortgage doesn’t feel right. 

How Does a Second Mortgage Work?

second mortgage works by borrowing based on the home equity you have accrued. Home equity is the value of the home you own. When you have a mortgage on your home, you don’t technically own all of it, so the part that you do own (equity) is the part of the mortgage you have paid off. Keep in mind, this doesn’t include interest, which makes up a significant portion of your mortgage payment.

How Do You Build Home Equity?

Equity can be accrued in a few ways. First, if your home’s value increases over time, so does your equity. This can happen if you make improvements to your home, or the real estate market in your area becomes more lucrative and your home’s value appreciates. Also, when you make payments on your mortgage, you will own a larger percentage of your home, so the total equity you have will increase. 

Similarly, if your home’s value decreases over time or you take out more loans against your home (reducing the percentage you own) your home equity decreases.

What Does a Second Mortgage Look Like?

When your lender grants a second mortgage, it will typically be a percentage of your home equity (on average, 20 percent). The second mortgage can take a few different forms. It can either be granted as a lump sum or a revolving line of credit.

Second Mortgage Lump Sum

The home equity loan can be given as a lump sum for you to spend as you wish. Second mortgages can be used in an almost infinite number of ways – to pay for repairs to your home, pay off credit card debt, or pay tuition fees. When you receive the lump sum, you will begin making monthly payments toward resolving the debt, with interest of course. This is an additional payment to that of your “first” mortgage, or purchase loan.

Second Mortgage Line of Credit

A home equity line of credit works similarly to a credit card, your loan amount is stated as the credit limit and you can borrow against that amount. Whatever you borrow is what you pay interest on and repay — so if you only use 5,000 of the 10,000 limit, you will make payments on the 5,000. You can make as many withdrawals as you want up to the credit limit. Once the borrowed amount is repaid, you can withdraw the full 10,000 limit again.

Pros and Cons of a Second Mortgage

While a second mortgage can free up your home’s equity into funds you can use right now, it could put you in a difficult financial position. Before taking out a second mortgage on your home, consider the pros and cons of this important decision.

Pros of a Second Mortgage

  • Lower interest rates than credit cards: due to the high value of your home, your interest rates for a second mortgage will likely be significantly lower than your credit card interest rates. For this reason, many people use a second mortgage to pay off their credit card debt, and then repay the second mortgage over the loan term.
  • Flexible uses: With a second mortgage, you are not restricted to using the loan amount in any way. You can spend the money on almost anything — as long as you’re able to pay it back with interest over the agreed period of time.
  • Higher loan amounts: A second mortgage allows you to borrow more than you could usually get from a loan without using your home as collateral. Because homes are typically worth a significant amount of money, there is more collateral to borrow against, giving you a higher loan amount.

Cons of a Second Mortgage

  • Higher interest rates than refinancing: Because there is less collateral than your original home loan, second mortgage interest rates will be higher than those of your original mortgage. If refinancing isn’t an option, you may still be able to take out a second mortgage.
  • Financial Strain: A second mortgage requires an additional mortgage payment to your current monthly bills, which could put a strain on your finances, especially if you’re taking out the second mortgage to cover previous debt, or find it difficult to meet your original mortgage payments.
  • Higher risk of foreclosure: If you stop making payments on any of your mortgages, you enter the foreclosure process. With the additional strain of a second mortgage, there’s a higher risk of foreclosure. This is why it’s not a good idea to use a second mortgage to pay for living expenses or costs — even for your first mortgage — as this method of spending is not sustainable and will likely result in losing your home.

Alternatives to a Second Mortgage

Is a second mortgage really the best way to accomplish your goals? If the risk of a second mortgage isn’t appealing to you, you may still have other options available for freeing up some extra cash flow from your home. As an alternative to a second mortgage, you could discuss refinancing your mortgage with your lender, or consider selling your home to resolve debt, get out of a troublesome mortgage, or free up the available capital locked in your home.

Refinancing Your Home Loan

When you refinance your home loan, you discuss your loan terms with your lender. They may be able to repackage your home loan with lower interest rates, or a longer loan term, depending on your needs. With a refinanced loan, the new loan takes the place of your existing mortgage. This is a great way to save a little money without having to assume the risks of a second mortgage.

Sell Your Home to a Real Estate Investor

If refinancing isn’t an option, or you’re having trouble making payment on your original purchase loan, a second mortgage isn’t going to help you resolve your financial problem. The best thing you can do with a home you cannot comfortably afford is to sell it and look for another that better fits your financial needs. When you sell your home, the sale will pay off the original mortgage, and you will have cash left over you can use to purchase another home, or pay off other debts or costs. 

For a simple, hassle-free sale, you can sell your home to a real estate investor. When you sell to a real estate investor, they will assess your home based on its current condition and make you a fair cash offer based on its market value. With this type of sale, you don’t have to make any repairs, prepare your home for the market, or hire a Realtor. Best of all, in as few as five days, you could have your home sold and liquidate the equity locked in your home for use however you see fit.

If you’re considering taking out a second mortgage on your home, it’s important to take time to really think about it. If your finances might be better served by getting out from under a troublesome house, the Hometown Development team can help. Give us a call to learn more about your options today.

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