What Happens to Your Current Mortgage When You Buy Your Next Home?

If you’re thinking about moving up to a new home, one of the biggest questions you might have is: What happens to your current mortgage? Whether you’re upsizing, downsizing, or just craving a change of scenery, understanding your options can help you make a smooth transition. Let’s break down what typically happens and what you need to consider.

1. Selling First: Paying Off Your Mortgage

Most move-up buyers sell their current home before (or at the same time as) buying their next one. When you sell, the proceeds from your sale are used to pay off the remaining balance on your mortgage. Any money left over after paying off the loan, agent commissions, and closing costs is yours to put toward your next home.

2. Buying Before Selling: Bridge Loans and Contingencies

If you want to buy your next home before selling your current one, you have a few options. Some buyers use a bridge loan, which is a short-term loan that helps cover the gap between buying and selling. Others make their purchase contingent on the sale of their current home. Both options require careful planning and a close look at your finances.

3. Porting Your Mortgage: Is It Possible?

Some lenders offer the option to “port” your mortgage, essentially transferring your current loan, rate, and terms to your new home. This is not available with every lender or loan type, but it can be a useful tool if rates have risen since you took out your original mortgage. Check with your lender to see if porting is possible for you.

4. Renting Out Your Old Home

Maybe you’re not ready to sell. Some homeowners choose to keep their current property and rent it out. If you go this route, you’ll need to qualify for a new mortgage while still carrying the old one, and you’ll become a landlord, so weigh the pros and cons carefully.

5. Don’t Forget About Prepayment Penalties

Some mortgages have penalties for paying off your loan early. Before you list your home or make an offer on a new one, ask your lender if any fees apply so you’re not caught off guard at closing.

Making a Smooth Move

Every situation is unique, and the best path depends on your goals, finances, and market conditions. Partnering with an experienced real estate agent and a trusted lender can help you navigate the process and make the most of your move-up journey. Have questions about your mortgage options? Let’s connect and make your next move a confident one!

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