You can sell a house with a mortgage and use the sale funds to clear the outstanding balance. Depending on how soon you sell into your current deal, you may also have early repayment charges to cover, and these can be substantial. Our guide explains your options for selling a house with a mortgage, the potential charges and the steps you should follow.
Selling a house with a mortgage at a glance
- You can sell a house with a mortgage
- The proceeds from your sale will cover the outstanding balance
- If any funds remain after clearing the mortgage, they are transferred to you
- If the sale proceeds do not cover the balance, you’ll be responsible for covering it
- You may have to pay an Early Repayment Charge (ERC) if your sale means you end your current deal early
What happens to your mortgage when you sell your house?
In most cases, your solicitor will handle settling the mortgage with your lender. They will obtain a redemption statement, outlining the remaining balance. Once your house is sold, proceeds are transferred to the lender to clear the mortgage and cover any fees. If anything remains after the mortgage and fees are paid, your solicitor transfers the balance to you.
If a mortgage balance remains once the sale is completed, you’ll need to arrange to pay that off.
Selling your house with a mortgage: The key steps
When you decide to sell your house with an outstanding mortgage, you’ll need to follow several steps for a smooth sale and full understanding of your situation.
- Get a mortgage redemption statement: Obtain a redemption statement from your lender. This will show you exactly what you owe, including any fees such as an ERC.
- See if the mortgage is portable: If you are buying a new house once you sell this one, you may want to keep the current mortgage deal you are on. Check the terms to see if you can port this mortgage.
- Decide whether to port or find a new deal: If your mortgage is portable, it may be more cost-effective to take the deal with you. If it’s not portable, or better deals exist, you may want to take a new mortgage product.
- Instruct your solicitor: They will handle all the legal aspects of your sale and organise the transfer of funds to the lender once your house sells.
- Complete the sale: On completion day, the mortgage is cleared (if sale proceeds allow).
What is the difference between porting a mortgage and getting a new mortgage when selling a home?
The difference between porting a mortgage and getting a new mortgage is mainly how much you’ll pay. Porting enables you to transfer your current deal (not the loan itself) to a new property, while getting a new mortgage is a completely new loan on different, and sometimes better, terms.
Porting a mortgage
Porting a mortgage is when you transfer your current deal (not the loan itself) to help buy a new home. You keep the rates and terms of your original deal, meaning it can often make things much more affordable. You’ll still need to apply for the mortgage and meet the lender’s criteria as it is now, not as it was when you first borrowed from them.
In some cases, you can borrow more when you port a mortgage, but it’s worth noting that any additional borrowing will be charged at a different rate to the ported amount.
Getting a new mortgage
If your mortgage cannot be ported, or current deals are much more appealing, you may want to get a new mortgage instead of porting. Just remember, if you are tied into a mortgage deal, you may have to pay an early repayment charge before taking a new product, and this could mean you spend much more than you expected. An ERC can be as much as 5% of the remaining balance.
Is it better to port a mortgage or get a new one?
Whether it is better to port a mortgage or get a new deal depends on several factors. Whilst porting can save you money, it may also be more expensive than what is currently available. Before settling on one over the other, ask yourself the questions below
- Is your current deal portable?
- If so, do you still meet its eligibility criteria?
- Are new mortgage deals offering more favourable rates?
- Would an ERC negate any savings a new mortgage product may offer?
- Will you need to borrow more than what your current deal allows?
Porting may work best if you are on low rates with high exit fees, but a new mortgage could be a better option if your current deal is ending, better rates are available, or your personal circumstances have changed.
Porting a mortgage or new mortgage deals at a glance
Our table below shows some of the differences between porting or getting a new deal.
| Porting a mortgage | New mortgage deal | |
| Mortgage rates | Will stay the same as your current deal | A new rate, which could be higher or lower than your current deal |
| Charges | Often avoided if the lender approves the move | Will apply if you are leaving the mortgage deal early |
| Application process | Full application, must meet lender’s current criteria | Full application, must meet lender’s criteria |
| Additional borrowing? | Possible but will be charged at a different rate to the ported amount | All lending is wrapped up in one loan |
Is selling a house with a mortgage more difficult?
No, the process of selling the house remains the same as if you were mortgage-free. However, there are certainly some things to consider before proceeding, as it could make your next moves more challenging.
Property valuation much lower than expected
You may be encouraged by one valuation, but put off by another, especially if it is much lower than you hoped.
Get at least three valuations from different estate agents and conduct your own research. If the valuations match your expectations and will clear the mortgage, you could proceed. If they come in much lower than you hoped and may leave you with a substantial amount to cover after the sale, you might need to reassess whether now is the time to sell.
You sell, but there is still a mortgage balance outstanding
If you sell your home but the price doesn’t cover the mortgage, you are in negative equity. Some lenders will not allow a sale in this case, and you may need to meet specific criteria for the sale to be completed.
Expired redemption statement
You may have got a redemption statement early in the process, but the delays in selling a house can mean it is soon out of date. In many cases, these statements are valid for around four weeks, so keeping it updated helps you avoid delays in completing the sale.
What happens if you sell a house in negative equity?
You can still sell a house in negative equity, but you will need lender approval and a plan to cover the shortfall before your sale can proceed.
Negative equity is when the outstanding mortgage balance is higher than the current property value, so selling it won’t clear what you owe.
This is where you will need the lender’s permission to sell. They still hold a legal charge over the home and have to agree to release it. If the sale doesn’t cover the mortgage in full, they will want to know how you will repay them.
Ways to cover negative equity shortfall
- Pay the difference from savings or other funds
- Agree a shortfall arrangement with the lender. There is no guarantee of this being provided.
- Reduce the balance before selling with overpayments within agreed limits
If the shortfall cannot be covered
If the shortfall cannot be covered, it may be best to wait. You could wait for property prices to rise again, or get consent from your lender to rent the property out. This could help you eat into the deficit and transform your position from negative to positive.
Is selling a house with a mortgage expensive?
It can be expensive to sell a house with a mortgage, but it largely depends on whether there are any early repayment charges to worry about.
| Charge | Amount |
| Early repayment charge (ERC) | Can be up to 5% of the outstanding mortgage balance* |
| Mortgage exit fee | Varies between lenders but can be up to £300, perhaps more |
| Valuation fees | Not charged by all lenders, but can be up to £300 |
| Arrangement fees for new borrowing | Added when getting a new mortgage or adding further borrowing to a ported mortgage. Varies by lender |
*ERCs usually taper by year: Example, starting at 5% in year one, dropping to 1% in year five.
Can I sell a house with a mortgage at any time?
Yes. You can sell a house with a mortgage at any time; however, many lenders have terms in place that don’t provide mortgages to those buying a house the current owner has held for less than six months. This can make it hard, but not impossible, for you to sell. Check the terms of your mortgage too; some lenders have specific occupancy terms that you’ll need to abide by. You should also remain aware of potential early repayment charges. The earlier you try to leave the mortgage, the higher the ERC will be.
Do I need to get permission from the lender before I sell a house with a mortgage?
No, in most cases, you do not need permission from your lender to sell your house with a mortgage, unless it is in negative equity. Our section further up the page explores this in a little more detail.
Speak to Cairds about selling your home
If you are considering a sale, speak to our team. We are independent estate agents in Epsom, covering Epsom, Ashtead, Ewell, Leatherhead and more. Our team of experienced property experts can help you sell your home, and help you find property to buy in Epsom and the surrounding areas. Contact us today to sell your home, or find a new one.
This is general information and not financial advice. Speak to a qualified mortgage broker for expert independent mortgage advice or consult MoneyHelper for assistance.