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Can I sell my house for cash even If still owe about 95% on my house to the mortgage company?

I want to sell my house for cash so that i could use that money to start up a business. I still owe about 95% on my original mortgage loan. Does anyone know if there is a possibility for me to get the cash from this sale instead of my mortgage company?
I am planning to keep paying the mortgage company out of my bank account every month as usual.
  • August 27 2012 - Saint Louis
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Answers (10)

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Profile picture for Ofe Polack
You can only sell the property if the title is clear and your title has a lien which is the mortgage.  You can sell it for cash and receive the rest of the money once the loan is paid and the closing costs are covered.
  • August 27 2012
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Profile picture for RichardCatt

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  • February 01 2013
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Profile picture for blank screen EXILED
By the way, even if there was a way to convert collateralize debt into personal debt, it usually is not a good idea, and usually the rates are substantially different.  Personal debt interest rates could be 15% to 21% annually.  30 yr fixed mortgage rates are presently below 4% annual for owner occupied properties.

The one exception on personal debt is 0% interest credit cards, but that is typically for only up to 15 months.  And they try to get you to run up the debt to get you trapped into the higher interest rates.

It might be OK for starting a business, but only if one knows that the business will have enough cash flow to pay off the debt before paying any interest...

And one can't take cash out from such a card without paying fees, and possibly interest, so one has to put other expenses on the card and save the cash that would have paid those expenses to use that cash for the business, or put chargeable business expenses on the card(s).

But one doesn't get offered those 0% interest credit cards unless one already has very good credit.

Don't forget, for most new businesses, it takes about 2 years before the business is bringing in any money.  That is a long time to be running in the red for someone without much cash reserves.
  • August 30 2012
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Profile picture for blank screen EXILED
Sorry, about beginning of 2009, thus about 18% decline in value since purchase, assuming about 3.5 years ago....
  • August 30 2012
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Profile picture for blank screen EXILED
user -

You didn't mention when you bought, nor what your loan to value ratio was at the time.  I'm assuming that at about 6% annual interest for a 30 yr fixed mortgage that you bought about 3.5 years ago.  That would be about beginning of 2008.

Nor did you mention what part of Saint Louis, thus it is hard to predict change in value since purchase, but here is a chart from the Zillow local info pages to give some idea:



The way I read the chart, the house as lost about 25% of the purchase price since purchase, and thus has no equity.  Even if it lost no equity, I'm assuming that one didn't put down more than about 5% of the price, but at the beginning of 2008, one could have put down even less.

So, if it didn't lose any value, and one put down 5%, and then paid off another 5%, the present loan to value ratio would be 95% x 95% = 90%.

Thus selling would give you 10% of the value, but 6% goes to the selling and listing agents and brokers as "commissions", leaving only 4%.  But then you have all the other fees on top of that, such as termite inspection... leaving just about "nothing".

But we already know the value has dropped since purchase.  If you didn't put at least 30% down, there is "no equity" to take out, no matter how one processes it.

If one has some equity, they can take out an equity line of credit for starting the business.... but it would be better to just save some money and run the business off of cash saved rather than paying interest.

Besides, depending on the type of business, one may be better running the business from the home, and thus not having to rent space for the business.

You can't get equity out of a property that has no equity, especially if Realtors are involved that have to be paid.  You may qualify for a "short sale", but then you will be receiving "nothing".  The lender may accept keys in lieu.... but then you still receive "nothing".

If you really don't need the home, you might also check to see what you could rent it out for, to see if you can get enough cash flow to cover the mortgage, insurance, taxes, maintenance... and still have a bit left over for the business venture...

Or, you might consider renting out a room and staying in the home and running the new business from the home.
  • August 30 2012
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Most if not all mortgages contain a due on sale clause.  That means the entire balance is due to the bank when title transfers. 

Unless you can pay off the bank you cannot give clear title to a new owner.  The bank holds an encumbrance on the property.

Trying to accomplish a sale without paying off the note could put you in a precarious legal position. 

If you do not have a Realtor I strongly recommend you speak to a REAL ESTATE attorney.
  • August 30 2012
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yes if you get enough to cover the loan and all cost.Otherwise you will be bringing money to the table
  • August 28 2012
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Profile picture for blank screen EXILED
If you have Realtors sell it for you, you will get nothing out of the sale, and anything that exceeds what is owed would end up going to the agents and brokers, or for termite inspections...
  • August 28 2012
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You may owe 95%, but the house may appraise for more than what you bought it for. Get a home equity loan or a line of credit and startup your business. Find a good mortgage person who knows creative financing.
  • August 27 2012
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Profile picture for stephhug
No, in order to sell the home and pass a clear title on to the new buyer you will need to pay off your existing mortgage in full.
  • August 27 2012
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