Here to Help: Selling with equity

The COVID-19 pandemic produced challenges for many households, including financial setbacks. These hardships can impact your ability to make timely mortgage payments.

While mortgage servicers offer relief options to help you stay in your home as you recover from a temporary setback, a long-term or permanent financial hardship may require you to do something different, such as selling your home.

If you can no longer afford to stay in your home, but you’ve built up equity in your home, one option is to sell it and use the proceeds to help pay off your mortgage and any missed payments. This is called selling with equity, or an equity sale. It is an important option when you want to avoid the negative consequences of a foreclosure.

These frequently asked questions can further your understanding of what it means to sell your home with equity, but you can also talk to your mortgage servicer about your unique situation:

1. What is home equity, and how do I determine my home’s equity?
   Home equity is the portion of the home’s value that you own. In other words, it’s the difference between the amount owed (which includes your mortgage balance and all other debts secured by the property) and the current market value of the home. When the market value exceeds the amount you owe, you can access that cash and use it for new housing, other expenses, or savings. Equity = Market Value – Amount Owed To help determine the market value of your home, you can work with an appraiser or real estate professional. Also, consider using one of the many online estimation tools that are easy to find with an internet search.
2. What options do I have if I can no longer afford my mortgage payments and decide that it’s time to leave my home?
   The decision to leave your home due to financial hardship can be difficult, but if you need to leave, your options depend on your financial situation:
   • If you have home equity, you can sell your home to resolve your mortgage debt and access cash for new housing or other purposes.
   • If you do not have home equity, you can reach out to your mortgage servicer to discuss other options like a short sale or Mortgage Release™ (also known as a deed-in-lieu of foreclosure).
     Foreclosure is another option — but one to avoid. In foreclosure, you lose out on any potential equity and your credit is damaged. These events may impact your ability to get new housing. You may also owe a deficiency balance after the foreclosure sale.
3. What considerations should I make before selling my home?
   Even when you have home equity, it’s important to remember that the proceeds from a home sale will be used to cover all debts secured by the property as well as any closing costs. This affects the amount of cash you’ll have after the sale. Also, keep in mind the cost of moving and getting new housing. It’s important to consider all the financial costs and benefits of selling a home.
4. If I sell my home, will that resolve any payments I missed?
   When you sell your home, the payments you missed will be included in the amount you owe your mortgage company at closing. Any late fees, expenses, or advances will be included as part of your payoff.
5. Can I sell my home while my mortgage is either in mortgage forbearance or if I’ve received other relief like a payment deferral or loan modification?
   Yes. You can sell your home while your loan is either in a mortgage forbearance or if you’ve tried other mortgage relief options. However, you will still be responsible for the amount that’s owed.
6. What steps are necessary to sell my home?
   Consider the following when selling your home, but keep in mind that some details may vary depending on the state.
   • Hire an experienced listing agent who knows the market.
   • Establish a realistic timeline and selling price that accounts for current market conditions.
   • Consider the listing agent’s advice when cleaning, decluttering, staging, or making any needed repairs to the home.
   • Let your listing agent market the home listing and show the property to potential homebuyers.
   • Discuss any offers with your listing agent after the showing. The agent will help you negotiate counteroffers and close the sale.
   You can also explore other home listing options, such as online marketplaces that may reduce your selling costs. For additional information, review The Selling Process.
7. What can cause my home equity to change?
   Your home equity can increase when you make your monthly mortgage payment and when you pay more than your usual payment, which reduces the principal. It can also go up when the property value increases in a good housing market. Making value-added investments or renovations can also increase the property’s value. However, your home equity can decline if market values decrease or when you do a cash-out refinance, take out a home equity loan, or the property deteriorates due to a lack of maintenance or repairs.
8. Can I still sell my home if I’ve taken out a home equity loan?
   Yes. You can sell your home if you’ve taken out a home equity loan. However, you will have to pay off the outstanding debt, including the home equity loan, as part of the closing process.