Mortgage & Home Sale: Understanding Your Loan Obligations

Selling a home involves settling up with all interested service providers, including your current mortgage lender. A home loan results in a mortgage lien on your property's title, which secures the debt's repayment to the lender. To get your lender to release the lien for a clear title transfer to the buyer, you must pay your lender back via the settlement, or "closing" process.

Mortgages Contain Due-on-Sale Clauses

Mortgage lenders prevent you from passing your loan on to another borrower. With the exception of assumable mortgages, such as some Federal Housing Administration and Veterans Affairs loans, you can't sell a home and transfer the existing mortgage to the buyer. A due-on-sale clause in your original mortgage agreement gives the lender the right to call your remaining mortgage balance due if you sell the mortgaged property or otherwise transfer title to another party. The due-on-sale condition is also known as an "acceleration clause."

Title Companies Prepare the Payoff

A title company (or in some states a real estate attorney) works with an escrow provider and your lender to ensure that funds are disbursed as necessary upon closing. A mortgage payoff statement provided by your lender shows the total amount needed to pay off and close the account, including interest, administrative fees and your remaining loan balance. After the title company pays your loan off, it forwards the remaining sale proceeds to you.