What happens when you sell a house that you still have mortgage payments on?

Discussion in 'Archived Threads 2001-2004' started by Allan Mack, Sep 22, 2002.

  1. Allan Mack

    Allan Mack Supporting Actor

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    I might be moving to another city in the next few months. I have a 5 year-old townhouse that I'm still making mortgage payments on (about 10 more years to go in my payments). I cannot rent out the place, and even if I could, I wouldn't, since I'd be moving a few thousand miles away.

    If I sell the place, what happens? Do I make any money out of it? Or does the bank only benefit from this? What about all the property taxes that I've paid for all these years? Would it have been better if I had just rented a place for the past five years? I was always told that buying a place was a better investment than renting a place, even if you sold the home before your mortgage was all paid up. But I don't understand how this could be.

    Please excuse my dumb questions. I am new at all this, and I'm not too knowledgable about real estate, finances, etc. Amy knowledge and advice from people who have been through this situation before would be greatly appreciated...
     
  2. Chad R

    Chad R Cinematographer

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    Well, it all depends what you sell it at. But you will pocket a certain amount of equity if you've paid enough into your house and haven't dicked around with any home equity loans.

    If you rented you would get nothing back. But property taxes you'll never see again, they are after all taxes.

    To see how much you'll get you'll have to have your property appraised and then see how much you still owe. That'll be a rough estimate, when you sell you will have to pay broker fees to the realtor, but you should still have something to put down on a place where you move.
     
  3. Andrew W

    Andrew W Supporting Actor

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    You will have to pay off the previous loan from the proceeds of the sale. You will also have to pay seller's closing costs and the realtor's commission. This can eat into your equity pretty quickly. If there is money left over, you get to keep it.

    Property taxes are water under the bridge. They don't really count for anything when you resell.
     
  4. Mike I

    Mike I Supporting Actor

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    Allen
    When you sell your townhouse, the procedes from the sale go first to pay off any morgage balance...If you use a realator, their commision also comes off the proceeds from the sale..
    For example if you sell for 100,000 and the morgage balance is 75000 than you net 25000 less any closing costs or commisions to the real estate agent which is usually 5 or 6 per cent of the total sale price...
     
  5. Jeff Ulmer

    Jeff Ulmer Producer

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    When you sell a property, in most cases your mortgage loan is paid off in its entirety out of the proceeds of the sale.

    Like others have said, what you get out of selling property is the difference between what you owe on it and the net amount after all expenses of the sale are taken into account.

    When thinking of selling, you need to know what the current market value of your property is - that should give you an idea of what it is worth, but what you get will depend on a number of factors, including whether there is a glut of housing like yours already available or not, the effectiveness of your agent, and whether your asking price is attractive to buyers. If you bought at a high price and the market is down, you may lose money. If the market has gone up, you may make money.

    Your equity is the difference between the selling price of the property and what is left outstanding on your mortgage. ie:

    Selling price: $100,000
    Outstanding mortage: $75,000
    Equity: $25,000

    As has been said above, real estate commissions and other closing costs will eat into your equity. If you owe more than your house is worth on the market, you will actually owe money to sell it. This is the only scenario when renting is preferrable, but hopefully not the case with you.
     
  6. Paul O

    Paul O Stunt Coordinator

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    Talk to a local realtor - they can run some comparables in your neighborhood to see what similar townhomes are selling for. That minus the mortgage you owe your bank (you can call them for a payoff) minus real estate commissions (typically 6% of the selling cost - will determine whether you have any equity which you should since houses have appreciated quite a bit in the last 5 years and you have been paying off some of the principal (although slowly) plus your down payment when you bought the home. Any competent agent should be able to handle this for you but i would encourage you to pick up a book on how to sell your house - there are plenty at the bookstore so you can understand the process for yourself and the ins and outs.
     
  7. Craig Robertson

    Craig Robertson Supporting Actor

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    the taxes are prorated, you are responsable for the portion of the tax year that you own the property, likewise the buyer.
     
  8. Steve Zatkoff

    Steve Zatkoff Stunt Coordinator

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    Allan,

    I don't know where you live, but chances are that your property has appreciated significantly in the 5 years you have owned your property. All that has been said above is thru, you will receive the difference between the principle you owe and what you sell your place for, less agent commissions, closing costs and probably a 110% tax credit.

    For example: If you paid $100,000 for the townhouse and sold it for $130,000 and only owe $75,000 then you have $55,000 in equity less agent commissions, closing costs and probably a 110% tax credit.

    Good luck,

    Steve
     
  9. Keith Mickunas

    Keith Mickunas Cinematographer

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    Allan, if your house has appreciated significantly in value, you probably should consider buying another house with the proceeds. If you make a profit on your house, and don't reinvest that profit within a certain amount of time (6 months I believe) then that profit is considered capital gains and will be taxed quite heavily. However if you take the profit and use it as a down payment on a new home, you won't have to pay any taxes. And then when you do taxes, you might end up with a big write off for all the various closing costs on both houses.
     
  10. SteveA

    SteveA Supporting Actor

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    If you've lived in a house you own for at least two out of the past five years, you don't have to pay any capital gains taxes (up to $250,000 in gains for singles, or $500,000 for a married couple).
     
  11. Scott Merryfield

    Scott Merryfield Executive Producer

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  12. Dennis Nicholls

    Dennis Nicholls Lead Actor

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