• You can sell a house with a mortgage
• You may be able to move (port) your existing mortgage
• If you can’t port, you’ll need a new mortgage for your new property
• You might find yourself in negative equity if your sale price doesn’t cover the outstanding mortgage
• There might also be early repayment charges and other associated fees to pay

Selling a house with a mortgage is certainly possible, but it’s something that should be given some thought. Whilst it is one of the most common ways to sell your home, it can be complex, often with early repayment charges (ERCs) to worry about, and sometimes a loss in value too.

In this blog, we explain how to sell a house with a mortgage and what to look out for, so your sale runs smoothly.

How does selling a house with a mortgage work?

Selling a house with a mortgage works much the same as any other typical house sale. You list it, you sell it, you buy a new home. However, it’s important to follow a few steps to ensure you are aware of potential charges you may encounter and whether your existing mortgage has any specific conditions attached.

1.     Check with your lender and ask for a redemption statement

Before you consider trying to sell a house with a mortgage, you should speak to your current lender. Ask them for a redemption statement. This will show how much remains on your mortgage balance and whether an early repayment charge or other fees may apply.

2.     Find out whether your mortgage is portable

In some cases, when you sell a house with a mortgage, you can move the existing mortgage deal to your new home. This is known as porting and isn’t available with all mortgage products. If porting isn’t an option, you’ll need a new mortgage for your new property or have funds to buy it outright. Remember, if you need a new mortgage, you’ll need to pass affordability checks all over again.

3.     Determine your sales price

Once you have an idea of the outstanding mortgage balance, any potential fees and whether your mortgage can be ported, establish how much you want to sell it for. Your price should cover the remaining mortgage amount, ERCs and other costs you may have to cover.

4.     Hire a solicitor

Hire a solicitor to manage all the legal aspects of selling a house with a mortgage. This includes transferring funds to the lender to repay the mortgage once the property is sold.

5.     List your property for sale

List your property for sale with an estate agent or online portal. Just be aware that timing is everything in the traditional market. It isn’t uncommon for your house to sit on the market for months. Cash house buyers provide an alternative that may offer a little less for your home, but guarantees a quick sale that can prove beneficial if you need to sell your house fast.

6.     Accept an offer, sell the house, and repay the mortgage

Once you have received an offer you are happy with, accept it and leave the rest to your solicitor! They will work with your lender to pay off the mortgage and any fees, and if any funds remain, they can be used for your next purchase or given to you directly.

What happens when you sell a house with a mortgage?

When you sell a house with an outstanding mortgage, the money from the buyer goes to your solicitor. They will then transfer funds to the lender. This will include any early repayment charges or penalties.

Then, if any funds remain, they will be transferred to you or used for buying your next home.

What does it mean to port a mortgage?

• Your existing mortgage deal, not the loan, moves from one property to another
• You will still need to reapply for a mortgage and meet lender criteria
• Ideal for when buying a house at the same time as you are selling
• It isn’t the funds that are ported but the terms of the mortgage that move. This would include interest rates and payment dates
• Allows you to avoid early repayment charges
• Porting only applies if you remain with the same lender

Porting a mortgage means that you pay off your existing mortgage when you sell the home and take out a new mortgage on the same terms. Many buyers often think it is the loan itself that moves; it isn’t. It is simply that the terms of your existing deal get applied to a new loan. This means you still need to reapply for a mortgage and go through a lender's assessment.

It will be a more streamlined process this time round, as the lender has a significant amount of information from your initial application, but they will still need to assess:

• Your current income
• Your current expenditure
• Your credit history
• The price of the property and the risk of lending against it

Is it better to port my mortgage or pay it off?

Avoiding early repayment charges and enjoying your original interest rates make porting often appealing, but there are also some disadvantages worth noting. For example, if you need to borrow more to help secure your next property, any additional borrowing will be charged at a separate, often higher, interest rate. This not only adds further costs but leaves you with two mortgages to manage rather than one.

Our table below compares the two options to give further insight. Paying off your mortgage may be best if your current deal is almost over, whilst porting is often preferred if you have low interest rates and potentially high exit fees.

How much does selling a house with a mortgage cost?

Fees can vary because lenders have different terms for borrowers, and some may charge fees for things others don’t. You can expect to pay some or all of the following when selling a house with a mortgage:

• Early repayment charges: Calculated as a % of the outstanding balance (normally 1%-5%) They can easily run into the £1,000s.
• Exit fees: Mortgage exit fees can vary and may be £300 or more.
• Mortgage valuation fees: Not always charged, but can cost £200+
• Mortgage arrangement fees: For any new borrowing, including when borrowing more on a ported mortgage, you may be charged additional fees for having the mortgage set up. Depending on how much extra is borrowed, this can exceed £1,000.

How soon can I sell a house with a mortgage after buying it?

You can sell a house with a mortgage at any time, but you may find specific restrictions in place if you attempt to sell in the first six months of ownership. This is primarily a lender safeguard against mortgage fraud as lenders want reassurance that a property has been genuinely purchased and lived in before it changes hands again.

Additionally, if you sell whilst in the middle of a mortgage deal, you’ll likely have significant early repayment charges to cover, and these can be extremely expensive. Check your mortgage before you try to sell, so you have a clearer understanding of any potential charges you may face.

Selling a house with a mortgage doesn't have to be complicated, but it can be a slow process, and at times costly. You might need to time the market right to sell your home, and with a sale potentially taking six months, you could miss out on the best interest rates. If speed and certainty matter to you, it's worth exploring alternatives to the traditional market. Selling your home with Bettermove enables you to sell exactly when you want, without delays. We cover your legal costs too meaning more money from your sale goes directly to you or to paying off your mortgage. Contact us today to learn more about the streamlined way to sell.