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If I sell my house for less than I paid, does the remainder get added to the new mortgage?

My husband and I are thinking about upgrading but if we sell our current home, we will get less than we paid for it. Does that mean the remainder left would be added to the new mortgage?

  • August 14 2012 - Abingdon
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Answers (5)

Profile picture for Ofe Polack
For what I gather you are upside down and if you sell the property for less than you owe, you will doing a short sale.  For a definition of a short sale, please google "what is a short sale", there is plenty of information out there on short sales.  You may also profit from meeting with a listing agent who is knowleageble about short sales.
  • August 14 2012
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Hi! There are a couple of ways to look at this. First, I live just next door to you in Fallston. I recently worked with a client that had the same problem. They simply brought the remaining amount to settlment and started fresh with a new loan.
  • August 14 2012
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Hello,

The quick answer is no. You have to have your mortgage paid in full. You cant stack the "loss" onto your new mortgage.

What you can do...

If you want to do an upgrade, have a couple of realtor brokers give you a "market analysis" -a price of what the value is on your home. Also have the agent fill out a net sheet on what it will cost you to sell your home, transfer tax, title insurance, realtor fee's etc. At that point make a decision with your husband if it is feesable to sell your home.

Best of luck,

Christopher Herber
  • August 14 2012
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Hi! Unfortunately, that is not how the process works.

If you owe more than what your current home is worth, then you will have to bring the difference to the settlement table when you close.

So if you owe $50,000 more than what you can sell your home for, you will need that much cash to bring to settlement.

The other option is to do a "short sale" on your home -- IF you and your husband qualify. That is where the bank that has the loan on your house is "shorted" the amount you owe them. There are a lot of qualifications, one of which is the inability to bring the money, and possibly not able to make payments.

If you qualify for a short sale, and decide to go that route, you would not be able to buy a home for two years, and your credit will take a hit. The bank could also possibly make you pay the money back over time, and the additional monies is seen as income, so you most likely would have to pay income tax on that.

If you would like to learn more, please let me know.
I would be happy to help & explain more to you!

Thank you!

Sincerely,
Marney Kirk
Keller Williams Excellence Realty
  • August 14 2012
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No, you completly misunderstand the process. Assuming you do not have enough money to cover the shortfall between what you owe and what the home sells for then you will need to do what is called a "short sale" Gte all your financials in order because your current lender will want to see that you can't afford to make up the shortfall. This process can take a few months. Now, for the bad part, If you do a short sale you will not be able to get a loan for a few years and your credit will suffer becaus ethe short sale is reported on your credit as a derogatory item. 
  • August 14 2012
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