Name on Deed but Not on Mortgage: Can You Sell a House?

Selling a house is a complex process under the best circumstances, but when your name is on the deed but not on the mortgage, it adds another layer to the transaction.

This situation isn’t as uncommon as you might think, and it raises several critical questions. What does it mean to be on the deed but not the mortgage? Can you sell this property despite the entangling financial obligations that aren’t legally your responsibility?

We will explore the roles of deeds and mortgages, the legal rights conferred by property ownership, the essential steps to successfully selling such a property, and the potential challenges you might face along the way.

Discover the steps you need to take to sell a home you own but which has a mortgage loan in someone else’s name.

Can You Sell a House If Your Name Is Not on the Mortgage?

Ownership of real estate can get complicated in some scenarios. You might own a property with your name on the deed, but the mortgage—the loan used to buy the house—is in someone else’s name. This can happen if you inherited a house, received it as a gift, or shared it from a previous relationship.

So, can you sell the house if you’re not on the mortgage? The short answer is yes, but there are some conditions and challenges you need to be aware of. It’s important to understand your legal rights as the owner and how to deal with the mortgage in another person’s name.

In this section, we’ll explore what rights you have, the possible difficulties you might face, and the steps you need to take to sell the house successfully.

Legal Rights of the Deed Holder

The person whose name is on the deed is the legal owner of the property. That means that they have the right to make decisions about the property – including selling it. However, that doesn’t mean that you can just ignore a mortgage that is in someone else’s name. Mortgages are attached to a property and must be cleared before a clear title can be transferred to a buyer.

While you have the right to sell the property, that doesn’t mean that you have the right to claim all of the proceeds from the sale. As the property owner and deed holder, you own any equity in the property. Equity is the difference between the property’s value and the remaining mortgage balance.

When you sell the property, sale proceeds must first be used to pay off the mortgage and any other debts or liens tied to the property so that you can deliver a clear title deed to the buyer. Any remaining funds get allocated to the property owner.

Conditions and Challenges

When selling a house with your name on the deed but not the mortgage, it’s crucial that you understand the mortgage loan and identify any terms that might impact the sale. While the mortgage might not be in your name, the mortgagor is still obligated to fulfill those terms.

Sometimes, the mortgage holder is unavailable due to illness or death, which means you could have to prove to the lender your ownership interest.

Start by communicating your intention to sell to the mortgage lender. Often, the sale requires cooperation from the mortgage holder, and you may have to get their consent.

Some clauses to keep your eye out for are:

• Due-on-Sale Clause
• A due-on-sale clause allows the lender to demand full repayment of the remaining mortgage balance if the property is sold or transferred. This could come into effect if a property is transferred into your name after the death of a family member.
• Prepayment Penalty
• Many lenders charge a prepayment penalty if the mortgage is paid off earlier than a specified date. These fees can result in a cost that often shocks some sellers.
• Assumable Mortgage
• Some mortgages are assumable, meaning that a new buyer can take over the existing mortgage terms if the lender approves. Assumable mortgages can improve a property’s appeal.
• Balloon Payment
• A balloon payment is standard on interest-only loans or shorter-term loans. If you see that there’s a balloon payment due at the end of the loan term (and that date is approaching), you need to act quickly to either sell the property or refinance. Make sure that you plan to pay off the balance of the loan principal and interest in the property when calculating your potential returns.
• Subordination Clause
• Properties can have more than one mortgage attached to them. A subordination clause specifies the order of priority of multiple mortgages, clarifying which is paid off first if there is not enough equity to pay off all loans.

The mortgage debt needs to be settled at the time of sale. This means that the proceeds from selling the house must cover the remaining mortgage balance. If the sale price is less than the outstanding mortgage, you may need to negotiate with the lender or find another way to cover the shortfall.

If the person whose name is on the mortgage is still alive, their credit could be affected if the mortgage isn’t fully paid off. Before deciding to sell, consider and discuss potential impacts with all parties involved.

It can be helpful to consult with a real estate attorney. They can provide guidance on your specific situation and obligations. Their expertise can help you navigate any legal complications that arise.

In some cases, it might make sense to refinance the mortgage in your name before selling the house. This can simplify the process, although it depends on your financial situation and the terms of the current mortgage.

Steps to Sell a House When Your Name Is on the Deed but Not on the Mortgage

If you want to sell a property that you own but your name isn’t on the mortgage, you approach the process similar to a traditional home sale while taking into consideration some additional steps.

Step One: Hire a Real Estate Agent

Hiring a real estate agent doesn’t obligate you to sell your property, but it does give you access to a real estate professional who can guide you through the process. Experienced real estate agents have been part of many different transactions and likely have experience with sales involving a different mortgagee and owner. It’s common when a spouse dies, and the surviving spouse is not on the mortgage, property is inherited, or community property is divided during a diverse settlement.

Your agent can help ensure that you take the necessary steps to protect yourself, maximize your sale proceeds, and transfer a property free and clear to the new buyer.

FastExpert can help you find and connect with a real estate agent who can guide you through the process. Look for an agent who understands the intricacies of selling a house under these conditions and can help market the property effectively.

Ask them about their experience with similar suggestions and their strategy for selling a home with a mortgage loan in someone else’s name.

Step Two: Review the Mortgage Agreement

As mentioned above, it is crucial that you understand the terms and conditions of a mortgage agreement. For example, as the property owner, you may have to make the monthly mortgage payment until the property is sold if the current mortgagee is unable to do so (usually due to death, illness, or financial inability). While selling a house with a mortgage in another person’s name is hard, it’s harder to get out from underneath foreclosure proceedings.

As soon as you find yourself with your name on the deed of a home, you should get ahold of a copy of the mortgage, which may require contacting the mortgage holder. Carefully read through the mortgage agreement to identify any clauses that might affect the sale, such as a due-on-sale clause or prepayment penalties. If needed, consult with a real estate attorney for clarification.

Step Three: Obtain a Property Appraisal

When deciding to sell any kind of real estate with a loan amount remaining, you want to know how much equity you have in the property. Equity is the difference between the loan and market value. Before you decide to sell, get a professional property appraisal to understand the property’s value.

The combined input of a comparable market analysis report from your real estate agent and appraisal report will give you the data you need to decide whether now is a good time to sell. If the property ends up being worth less than the mortgage amount and its potential fees, continuing to make payments on the loan and allowing the property to appreciate might be a better option.

However, if your appraisal shows that a sale will pay off all debts and you will receive profits, then it might be a great decision to sell.

Step Four: Communicate With the Mortgage Holder

Once you have decided to sell, you need to contact the party holding the mortgage. Mortgage holders are usually banks, credit unions, or mortgage companies, but it’s also possible that the original lender sold the loan to another investor, such as a private investor, insurance company, or pension fund.

You will likely need the mortgage holder’s cooperation to sell the house, even if the mortgagor (person whose name is on the loan) is involved in the sale. If the mortgagor is not involved, then you will absolutely need to contact the mortgage holder directly.

Inform the lender of your intention to sell the property. Discuss how the mortgage will be paid off and address any concerns or requirements they might have.

Step Five: Prepare the House for Sale

Work with your real estate agent to prepare the house for sale. Your goal should be making small, easy improvements to increase the property’s value.

Start your sale prep with our complete checklist of steps to get a house ready to sell. A well-prepared house can attract more buyers and potentially higher offers.

Step Six: List the Property and Market It

Effective marketing can help you reach a wider audience and sell the property faster. Your agent will list the property on the MLS, informing other agents and buyers that it is available for sale.

Every agent has a different marketing strategy. Make sure you understand your real estate agent’s strategy. Expect them to have professional photography taken and to host several open houses and private showings. During this time, it is your job to make sure the property stays pristine and ready to show at any time.

Step Seven: Negotiate with Buyers

How many offers you receive depends on your property’s desirability, market conditions, and your agent’s strategy. When you receive an offer, you can either accept it or negotiate.

Review offers with your real estate agent and negotiate terms that are favorable to you. Be prepared to address any concerns buyers may have about the mortgage situation.

Step Eight: Handle the Closing Process

The closing process finalizes the sale and ensures all legal and financial matters are settled. Your escrow company or real estate attorney will need to contact the lender and inform them of the contract and sale timeline. As long as the principal balance and any additional fees are paid through the sale, you shouldn’t have a complicated sale.

Your real estate agent, closing service provider, and lender will handle the necessary paperwork to ensure the mortgage is paid off at closing. Check with your title company to ensure all liens are cleared and there are no delays in transferring the title to the new owner.

Potential Challenges and How to Overcome Them

Selling a house with your name on the need but not the mortgage is possible, but you may encounter some hurdles that you need to overcome.

Disputes with the Mortgage Holder

The mortgage company may have concerns about the sale, particularly if they feel that the market doesn’t support a sale price that will allow them to recover the loan amount. Make sure that you open lines of communication with the mortgage holder early in the process.

Explain your ownership interest and intentions clearly. Seeking legal advice can also help you understand your rights and negotiate terms effectively.

Legal Issues

Legal complications can arise, especially if the mortgage lender challenges your right to sell the property or if there are other liens on the property. Do not try to take on any legal complications yourself.

Hire a real estate attorney to navigate any legal issues. They can help ensure all paperwork is in order, review any legal documents, and represent your interests in any disputes.

You Don’t Know Who the Mortgage Holder Is

One of the biggest challenges we see during sales when the deed holder and mortgagee are different people is that the property owner doesn’t know who holds the mortgage or who they need to make mortgage payments to. This is especially common in cases of inherited properties or complex financial situations.

Start by reviewing any existing mortgage documents and contacting the original lender. Mortgage companies who originate mortgages usually sell them to investors on the secondary market. If the mortgage has been sold or transferred, the original lender should be able to provide information on the current holder. You can also check your credit report or consult with a real estate attorney to trace the mortgage holder.

Continuing Mortgage Payments

Even though your name is not on the mortgage, it is important that mortgage payments continue to be made, otherwise the mortgage company may choose to foreclose.

Maintaining ongoing mortgage payments during the sale process can be a financial strain, especially if the property is not generating rental income. Have a plan to continue making mortgage payments until the sale is finalized. This might involve budgeting carefully or arranging temporary financing.

Expert Guidance for a Smooth Sale When Your Name Is on the Deed Not the Mortgage

Selling a property with your name on the deed but not on the mortgage creates added levels of complexity and requires more collaboration with third parties. However, you can achieve a successful sale with careful planning and the right support.

Remember to review mortgage terms carefully, maintain open communication with all parties, and seek professional advice to navigate any legal or financial hurdles.

Get the expert help you need by connecting with seasoned real estate agents through FastExpert. Partnering with a knowledgeable agent gives you the advantage of effective property marketing, strategic pricing, and seamless sale coordination. They can provide the insights and support you need to ensure a smooth and successful transaction.