How common is selling a house with mortgage in Sydney? It’s actually pretty common. In fact, most Australians sell their houses within 10 years of their mortgage.

But they’re not always aware how selling will impact their existing mortgage. Particularly if it’s their first time.

You first need to know the steps you will take. This also makes it easier for you to walk through the process. Keeping you from raising more money on the fly.

Eager to learn more? Work with mortgage brokers in Sydney. Doing so is going to make a big difference. That’s because you get a better understanding of what options are available. And what your obligations are.

Understanding Mortgage Discharge: The Basics

What do you have to do when selling? Settle or discharge your mortgage. Meaning you have to pay off the balance you owe the loan. It includes any interest and fees up to the settlement date. This step is essential because lenders hold a legal interest in your property as security for the loan. That must be cleared before you can fully transfer ownership to a buyer.

The discharge process typically involves notifying your lender of your intent. So you’ll submit a discharge request form. Afterwards your lender will process it. You’ll then need to wait for a few days or weeks. So tell your lender as early as possible. It will help you avoid delays.

How Selling Affects Your Mortgage Balance

Your sales go toward paying off the remaining mortgage balance. Any remaining funds after discharge become yours. That is after any fees and legal costs.

However, the final amount depends on your specific loan terms. Some lenders may charge exit fees. Especially if you’re breaking a fixed-rate loan early. In such cases, consult mortgage brokers in Sydney. Doing so helps you understand potential penalties and see if refinancing options could help.

Early Repayment Fees: What to Watch For

Is your mortgage a fixed-rate loan? Then selling your property before the term ends could result in break costs. You could also be charged with early repayment fees. These offset the interest they lose by ending the fixed-rate period early. This can add up quickly. So it’s crucial to check your loan contract for any clauses about break fees.

Even for variable-rate mortgages, some lenders might charge exit fees, though these are generally lower than fixed-rate break costs. Always review these fees. Doing so helps you plan ahead.

Mortgage Portability

You can actually transfer your mortgage to a new property. Even without discharging it. This is called mortgage portability. This can be a smart choice if your loan has a favourable interest rate. Or if you want to avoid early repayment fees. The lender will simply move the loan from the current property to the new one. Making the sale and purchase more streamlined.

However, portability is not available with all loans. And some conditions also apply. For example, the new property must meet the lender’s requirements. Also, any additional borrowing needed may require you to refinance. Want to determine if this is a viable option for you? Consult mortgage brokers in Sydney.

Options for Managing Remaining Debt: Bridging Loans

Are you selling one property to buy another? What if the timing doesn’t align perfectly? Then a bridging loan can help cover the gap. But this is a short-term solution. It lets you purchase a new property before your existing one is sold. The loan covers the down payment or full cost temporarily. Bridging the time between sale and purchase.

This is no doubt convenient. But they may come with higher interest rates due to being short-term. So make sure to weigh the costs and benefits carefully.

Paying Off Additional Loans: Second Mortgages and HELOCs

Have you taken out additional loans? Something like a second mortgage. Or did you open a home equity line of credit? You also need to pay these off when you sell. That’s because they use your property as collateral. So they must be settled along with the primary mortgage. Lenders will typically require that you discharge these loans at the same time as the main mortgage.

Coordinating the payoff for multiple loans can be complex. Especially if the loans are with different lenders. A broker can provide guidance on how to settle multiple debts efficiently.

Using the Sale Proceeds: Reinvesting in a New Property or Paying Off Debt

Have you covered your outstanding mortgage and fees? Then you can decide what to do with the remaining sale proceeds. Many people reinvest the funds as a down payment for a new home. This allows them to upgrade or relocate. Others use the money to pay off other debts or boost their savings.

Do you plan to buy a new property? Consider whether you’ll need to apply for a new mortgage. The process will involve qualifying based on your current financial status.

Tax Implications When Selling Your Property

The sale of an investment property in Australia is subject to capital gains tax. This may impact your profits. Your primary residence is generally exempt from CGT in certain conditions. But this may not be the case if you’ve rented the property out for a period. Consult a tax advisor. They will help clarify any tax obligations and potential exemptions.

Does the sale not incur CGT? Then you may be able to reduce the amount through various deductions. Especially if the property was rented out. Understanding the tax consequences helps you plan your finances and budget effectively.

AFMS Group: Simplifying Your Mortgage Journey

Selling your home? We can make managing your mortgages easier for you. But our mortgage brokers in Sydney do more than that. Planning to buy or refinance? Our expert team is also here to guide you through it. We’ll give tips on discharge fees and help you explore mortgage portability. Or if you’re simply looking for good mortgage options, we’re here to help. Call us today. Let’s talk about your options.