How To Sell A Home With Two Mortgages

Dated: November 9 2017

Views: 449


If you've tapped the lender well twice and hold two mortgages on one house, you might think selling that house will be a challenge. After all, having two mortgages doesn't mean you owe more on the house—it just means you have loans coming from two different sources. So what actually happens when it's time to sell?

The truth is that unloading a house with two mortgages doesn't have to be tricky, and can be a similar process to selling a home with one mortgage. However, it has the potential to become more complicated, so you need to know the facts.

Why would someone need two mortgages?

There are a variety of reasons for dual mortgages on one house, but one of the most popular reasons is if the buyer can't afford a 20% down payment but doesn't want to pay private mortgage insurance. This is known as a piggyback mortgage, or 80-10-10. When a home buyer gives 10% as a down payment on a property, a piggyback mortgage allows the buyer to finance 80% with one mortgage, then an additional 10% with a second mortgage—hence two mortgages.

As long as you can afford to make timely payments on both loans, this can be a feasible option.

How to sell a home with two mortgages

Selling a home with two mortgages is mostly like selling a house with one mortgage, says Aaron Hendon, a Realtor® with Christine & Company in Seattle.

To make yours a regular home sale (as opposed to a short sale), "the home needs to be worth more than the total of the mortgages," Hendon says.

That means creating a strategy with your agent that will generate enough income to cover the amounts you owe on both liens, and hopefully enough extra that you turn a profit on the sale. When the closing is completed, the title company will then pay off each mortgage, and hopefully cut you a check for whatever is left over.

Difficulties with selling a home with multiple mortgages

There are also a few snags to consider when you are trying to offload your home with multiple mortgages If your home has decreased in value since you bought it, you might not be able to cover both mortgages. In that case, you might want to reconsider the sale.

If you're desperate to move and still want to proceed, you can do so, but you should be prepared to make up the difference on your own to pay off each loan. In that case, the money to cover each mortgage will come out of either your pocket or the second loan holder’s pocket in the form of a short sale, says Hendon.

In a short sale, the lender accepts less than the full payoff for your loan when you sell your home, says Michele Lerner, author of "Homebuying: Tough Times, First Time, Any Time."

"You’ll have to demonstrate financial hardship to explain why you need to sell the home at a loss rather than keep it," Lerner says, but you should still be able to make your big move.


Blog author image

Mark Ross

For Mark Ross, founder of Ross NW Real Estate and professional real estate broker, real estate has always been the career of choice. During his 30 years in the industry, Mark has gained experience in ....

Latest Blog Posts

6 Projects To Banish Boredom From Your Yard

We're all about indulging in Starbucks' latest seasonal concoction or this season's "it" bag. (OK, maybe a knockoff version of this season's "it" bag.) Trends are just plain fun — and they keep

Read More

How To Renovate Tight Living Quarters Without Cutting Corners

If you live in a small space, you’re used to having to come up with clever solutions to maximize your home’s potential. So whether you’re looking to renovate a studio apartment or small house,

Read More

Are You Making One Of These 7 Landscaping Mistakes

You can just picture it: a pretty cottage garden overflowing your front yard, with tons of heavy, scented blooms.Well, at least you can picture it with your eyes closed. With your eyes open all you

Read More

Fannie And Freddie Set Dates For Their New Refi Option

The Federal Housing Finance Agency didn’t have a set date for its new refi option targeted to low-income borrowers when it announced the program last week. But on Wednesday, both Fannie Mae and

Read More