When Do You Stop Paying The Mortgage When Selling Your House?

When you sell your house, it's essential to understand the timeline of mortgage payments. You have a lot to pay for during this process and naturally you won't want to spend a penny extra. That may have left you wondering when do you stop paying the mortgage when selling your house?

In this insight, we will cover all you need to know about how your mortgage settles when you sell and when your last payment is expected. 

Key Takeaways

• When selling your house, you stop paying the mortgage once the sale is complete and the buyer's funds clear the balance.
• Your solicitor handles mortgage redemption, ensuring the sale proceeds or new mortgage funds pay off the mortgage.
• After the sale, you cannot continue paying the mortgage on the sold house; the proceeds cover the remaining balance.
• After this point, you will not make further payments to the old mortgage account, but be cautious about cancelling your direct debit.

When Do You Stop Paying The Mortgage When Selling Your House?

When you sell your house, you typically stop paying the mortgage once the sale is complete and the buyer's funds are used to pay off your outstanding mortgage balance. Following this point you stop paying the mortgage on your old property. You can cancel your old direct debit from this moment.

The exact date that this happens depends on a few factors, such as:

Your Completion Date

The closing date is when the ownership of the house transfers from you to the buyer. Typically, your mortgage lender and the buyer's closing agent will coordinate the necessary financial transactions during this process.

Your Mortgage Redemption

Before the payments stop, you need to close the old mortgage, you do this by simply paying it back. That would either be with the funds from a new mortgage or sale proceeds. In both cases, your solicitor will handle this for you, so make sure they do! Your solicitor will request your redemption amount from your lender and have this ready for completion day.

Payment Due Dates

If your completion date is before your next mortgage payment is due, the proceeds from the sale will be used to pay off the remaining balance, and you won't have to make any additional payments. 

Timeline of Mortgage Settlement

A mortgage payment typically consists of principal (the amount borrowed) and interest (the cost of borrowing). Each payment is usually due on a specific date every month, as agreed upon with your lender. If you sell your property, you use the funds from the sale to pay the old mortgage account. Here is a timeline of the events:

Completion Date

This is the day when all the paperwork and legal formalities are completed, and the buyer officially becomes the new owner of the house.

Next Mortgage Payment

Your mortgage payment is typically due on a specific date every month. Let's say your completion date is on June 15th, and your next mortgage payment is due on July 1st.

Proceeds from the Sale

When you sell your house, the buyer pays the agreed-upon purchase price. From that money, the portion required to pay off your remaining mortgage balance is set aside.

Paying off the Mortgage

In this example, since your completion date is before your next mortgage payment is due (July 1st), the proceeds from the sale will be used to pay off the remaining balance on your mortgage.

No Additional Payments

As a result, you won't have to make any additional mortgage payments beyond June 15th. The buyer's funds cover the remaining balance, and you are no longer responsible for the mortgage on that property.

This example assumes there are no other outstanding fees or expenses associated with the mortgage. It's essential to communicate with your mortgage lender and the professionals involved in the closing process to ensure a smooth transition and clarify any specific details related to your situation.

In summary, if your completion date occurs before your next mortgage payment is due, the funds from the sale will be used to pay off your mortgage, and you won't have to make any additional payments.

Examples of Mortgage Payment Scenarios

Here are the two main scenarios to expect:

Completion Date Before Next Mortgage Payment

Let's say your completion date is June 10th, and your next mortgage payment is due on July 1st. In this case, the proceeds from the sale will be used to pay off the remaining balance on your mortgage. You won't have to make an additional payment because the sale covers the outstanding amount.

Completion Date After Next Mortgage Payment

If your completion date falls after your next mortgage payment is due, you will need to make that payment. For instance, if your mortgage payment is due on July 1st, but the completion date is July 10th, you are still responsible for making the July 1st payment. Once the completion takes place, the buyer's funds will be used to pay off the remaining balance, and you won't have to make any further payments.

Can You Keep Paying the Mortgage After Your House Sells?

No, you cannot continue paying the mortgage on a house that has already been sold. Once the sale is complete and ownership of the house has transferred to the buyer, your responsibility for the mortgage ends. The proceeds from the sale are used to pay off the remaining balance on your mortgage, thereby satisfying your obligation to the lender.

Who Pays Off The Mortgage After Selling a House?

it is the responsibility of the seller's solicitor or conveyancer to handle the payment of the mortgage when selling a house. The buyer's solicitor or conveyancer typically works with the seller's solicitor to ensure a smooth transfer of funds.

During the closing process, the buyer's solicitor will obtain the necessary information from the seller's solicitor regarding the outstanding mortgage balance and any other relevant mortgage details. The buyer's solicitor will then arrange for the payment of the mortgage using the funds provided by the buyer.

The seller's solicitor plays a crucial role in facilitating the transaction, including coordinating with the mortgage lender to obtain the accurate mortgage payoff amount, ensuring that the funds are appropriately allocated to pay off the mortgage, and handling the necessary legal documentation.

Cancelling the Direct Debit

If you clear your mortgage and have no further mortgages lined up, go ahead and cancel your direct debit. If you have moved home and taken a new mortgage with the same lender. as you tend to keep your mortgage account number if you have ported, it's a good idea to check with your lender first when you can cancel the direct debit. 

In most cases, cancelling the direct debit is done automatically by the lender and there is no need to do this yourself. If funds are taken from your account after you have closed your mortgage, run to the bank on the same day and they can retrieve the funds back without question.

Summary

When selling your house, it's crucial to understand the timeline of mortgage payments. You want to ensure that you don't spend a penny more than necessary. So, when do you stop paying the mortgage when you sell your house? As soon as you clear it, you do not make any payments to it after and can cancel the direct debit after confirming with the lender.