If I already own a house of which I am still paying a mortgage on, and I move to a new house. What happens in terms of mortgages when I sell my existing house to move to the new house?
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Basically, what will normally happen is that depending on how much you’ve paid down your first mortgage, it will be paid off by the sale of the home. Now, if you haven’t paid much off of the principle of the loan (creating what’s known as equity), you may end up having to pay money out of pocket for closing costs, required repairs, etc. However, if your home has some equity in it and you sell it for more than you paid for it, you’ll be able to pocket that extra money.
For example, say you bought a home for $200K and were able to pay off $20K of the loan principle, you’d now have $180K left on the loan. If you were able to sell it for $220K, you’d pay off the loan and make $40K before closing costs.
Now, if you are wanting to buy a new home while also selling your current one, you’ll basically apply for a second home loan. Depending on your credit and debt-to-income ratio (DIR), you may only be able to make offers on new homes with the contingent of your first home selling before the closing date. Not a lot of sellers like to accept that as a condition though, so it may be harder to get sellers to agree to it until your first home is under contract to be sold.
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