Selling a House with a Mortgage

Learn how you can sell your house with a mortgage in the UK

Selling a house with a mortgage is more common than you think. According to ONS data, around 26% of all dwellings in England were owned with a mortgage or loan in 2021. This accounted for about 6.5 million dwellings and wasn’t that much less than the amount of homes owned outright (37%). 

In my 10 years as a qualified solicitor, I have helped homeowners navigate the property selling and buying process while still paying off their mortgages. While it’s possible to do, it’s not as straightforward as selling a house you own outright. But it’s also not as complicated as some people believe, especially when you know which routes you can take. 

I’m going to cover all the ways you can sell a house with a mortgage in the UK, drawing upon my own extensive experience as well as guidance from other experts within this area. You’ll learn how your mortgage can affect the selling process, what you can do about it, the pros and cons of various selling routes, and plenty more. 

Table of Contents

• Can you sell a house with a mortgage?

• What happens when you sell a house with a mortgage?

• Should you port or pay off your mortgage?

• The pros and cons of porting your mortgage versus paying it off

• Case Study 1: Porting your mortgage

• Case Study 2: Switching your mortgage

• How much does selling a house with a mortgage cost?

• How much will an early repayment charge cost?

• When might you get an early repayment charge on your mortgage?

• When does an early repayment charge not apply?

• What happens if your property has devalued when you sell it?

• What you can do if you’re in negative equity

• Pros and cons of selling a house with a mortgage vs when you own it outright

• Best ways to sell a house with a mortgage

• Is a cash buyer the right option for you?

Can you sell a house with a mortgage?

You can 100% sell your house even if you’re still paying off your mortgage. The UK Government even states this within its official advice for selling property. It also outlines the two options you have as a homeowner with a mortgage:

1. Move the mortgage to your next house or flat (known as ‘porting’ your mortgage)

2. Pay off your mortgage (usually with profits from your house sale and usually before you buy your next home)

What happens when you sell a house with a mortgage?

As you’ve just learned, there are two routes you can take when selling a house with a mortgage. However, there are more things to consider than just choosing whether to move or pay off your loan. 

Step 1: Contact your mortgage lender

This is one of the most important steps to remember and should be done before you decide to sell. You’ll want to get in touch with your lender and work out how much is left on your mortgage. This figure may determine whether you decide to sell now or in another year or two after you’ve paid more off. 

You should also check if your lender charges anything for early repayments. An early repayment charge (EPC) only comes into effect if you pay off your mortgage before your agreed-upon end date with the lender. It’s different for every lender and some may not have it in the contract. 

For example, Lloyds early repayment charges (if included) range from 1-5% depending on your deal. A lot of lenders will also let you overpay up to 10% each year without incurring charges, according to Money Helper. So you may not need to pay if you’re below this threshold. 

Top Tip: There are numerous mortgage overpayment calculators out there, including this one from Money Saving Expert. You can use these to get a good idea of how much extra you might need to pay if you sell your house now.

Step 2: Decide whether you want to port your mortgage or pay it off

If you still want to sell after talking with your mortgage lender, you’ll need to choose between taking your mortgage to your new home or paying it off before moving.

Option 1: Porting your mortgage

This basically means taking your mortgage with you when you move homes. What usually happens, according to HomeOwners Alliance, is your mortgage rate stays the same and you won’t need to pay an ERC (if you move quickly). I can also confirm that you’ll need to re-apply for your mortgage loan and your lender will want to check your next property’s value provides adequate protection for their continued investment. 

You should, all going well, be able to transfer your mortgage rate, terms and conditions without much fuss. This is because porting has become commonplace with so many people buying and selling while still owing on loans. 

“Since the 2010s, mortgage porting has become much more widespread and normalised, largely in response to increased competition in the mortgage market, rising early repayment charges (ERCs) on fixed-rate deals, and growing demand for flexibility as more borrowers move home,” Nick Mendes, mortgage technical manager at John Charcoal, was quoted saying in Forbes. 

However, there may be certain cases where your mortgage terms, rate or conditions change due to you having different financial circumstances. For instance, if your credit score is lower, you may not be entitled to the same rate or terms. 

On the other hand, if you have a higher credit score or your new home has a higher value, you might be able to borrow more money. People often do this and use the money for renovations or repairs on their new home. Unfortunately, you can’t just get your existing loan topped up. Any additional money you borrow will be part of a new loan with a different rate. 

Top Tip: Use the HomeOwners Alliance mortgage calculator to work out how much you can borrow. Keep in mind some lenders may also charge an administration fee or valuation fee for your new property. 

Option 2: Paying off your mortgage

Paying off your mortgage essentially means switching from your current mortgage agreement for your current house to a new mortgage agreement for your new house. You can only switch to a new mortgage if you pay off the remaining amount due on your current mortgage. 

The good news is that you should be able to do this with the money you make from selling your house. According to The Advisory, your solicitor or conveyancer will typically take care of this for you, so you barely notice the money coming and going. 

As an experienced solicitor with over 10 years’ experience, I have handled many mortgage loan payments for clients who have sold their house and are buying a new one. It’s usually a straightforward process that can be finalised relatively quickly depending on your mortgage lender and their terms. 

Sometimes you may be required to pay an early repayment charge (ERC). As we covered earlier, this can range from 1% to 5% of your remaining loan amount. It’s also reliant on certain factors, such as what kind of loan you have. If you don’t want to pay an ERC, you can avoid it by porting your mortgage instead. However, as HomeOwners Alliance highlights, Standard Variable Rate loans generally can’t be ported and have to be paid off in full before switching.  

Should you port or pay off your mortgage?

It really depends on your specific circumstances and how you want to manage your debt and finances. Here are some common scenarios homeowners with mortgages might encounter when selling, including which route is usually best. 

The pros and cons of porting your mortgage versus paying it off

All those scenarios aside, there are some general pros and cons you should consider when deciding whether to port your mortgage or pay it off and switch to a new one.

Porting Your Mortgage

Paying Off Your Mortgage

At the end of the day, you can do as much research online as you want about porting versus paying off your mortgage. However, I recommend getting in contact with your mortgage lender early in the process. You just never know what options they might have that could help you through this process. 

Edward Checkley, managing director at Advias, says that a lot of homeowners don’t know what options exist and end up feeling unnecessarily trapped because of it. 

“Many borrowers may not be aware of the flexibility offered by their existing lenders. This could be, for example, exceeding the original loan to value (LTV) limits whilst maintaining the rate or reallocating the borrowing to interest-only. If these features were common knowledge, then many may give serious thought to porting rather than feeling trapped,” he was quoted saying by Mortgage Solutions. 

Case Study 1: Porting your mortgage 

Keeping a lower interest rate and investing savings into property

Porting your mortgage can be very useful when dealing with higher interest rates, especially if they’re considerably higher now than your current deal. Craig Fish, founder and director at Lodestone Mortgages and Protection, spoke to Mortgage Solutions about encountering this exact situation with a client. 

He helped homeowners port their mortgage when they sold their primary residence and moved into a property they had previously rented out. By doing this, they were able to keep a lower rate and save money that they later invested in property. 

“Being that their current rate is fixed until the end of 2025 at 1.34 percent, they have requested to take this mortgage with them. Because they are moving into a previously let property, and they have equity from the sale of their current residence, they are going to invest those funds into a new buy-to-let property and transfer their other buy-to-let mortgage across,” Fish said in the article. 

“That rate is 2.05 per cent until early next year. Needless to say, choosing new products was completely off the cards.”

While staying the course with their mortgage and porting it to their new home might have been the best option for one couple, the next case study highlights a scenario when remortgaging can work better. 

Case Study 2: Switching your mortgage 

Remortgaging to avoid higher monthly repayments

Megan Addy, director and independent mortgage and protection advisor for Prism Mortgage, recently published a case study showing how it’s possible to secure a lower mortgage rate with the right legal advice. 

This particular situation concerned two homeowners, Holly and Jason, who had a two-year fixed rate mortgage on their house. Although Holly and Jason weren’t actually buying a new house, their situation still demonstrates how increasing the value of your property asset (i.e. moving into a bigger or more expensive home) can secure you a lower rate. 

Holly and Jason’s fixed-rate loan was about to expire, meaning they would be automatically moved onto the lender’s SVR rate, which was a big leap from 4.11% to 8.49%. 

“When they reached out to me about their remortgage, they knew they needed to take action, but they felt overwhelmed by the numbers and their options. Halifax had offered them a 6.31% 2 Year Fixed Rate deal with payments of £808.07 per month or a 5 Year Fixed Rate at 5.76%, which would result in payments of £759.36 per month,” writes Addy. 

So even at the lowest new repayment rate, these homeowners would’ve been paying over £100 extra per month on their mortgage. Prism Mortgage was able to challenge the mortgage lender’s valuation of Holly and Jason’s home. 

With a higher value property, they qualified for lower rates and switched over to a five-year fixed rate of 5.15%. They also extended their mortgage term to 40 years, reducing the monthly repayment again, so it ended up about £40 more per month than before.

I should repeat that Holly and Jason weren’t moving houses in this situation. However, it still shows how switching mortgages between houses can open up new deals and rates. These rates or agreements can be even better if you’re moving into a higher value property. If Holly and Jason had been in a moving situation and ported their mortgage, they would’ve ended up on a much higher rate. 

How much does selling a house with a mortgage cost?

The cost of selling your house with a mortgage depends on your situation. It can cost you nothing or cost you thousands of pounds. Here’s a breakdown of the potential costs you might encounter depending on whether you port or switch your mortgage. 

How much will an early repayment charge cost?

The most expensive fee when selling a house with a mortgage is usually the ERC. This is because it varies so much depending on your loan agreement and remaining debt. As mentioned, an ERC will usually cost between 1% and 5% of your remaining loan balance. 

You can use this early repayment charge calculator from Nationwide if you want to get an estimate, but you’ll need to talk to your mortgage lender for an accurate figure. I’ve also included two examples below to give you a better idea of how these repayments work. 

ERC Payment #1

Let’s say you have a two-year fixed rate mortgage with a 3% ERC. You currently have £345,000 remaining on your loan. If you were to sell your house now and pay the mortgage off, you would have to pay an additional ERC of £10,350. 

Some lenders offer a reduced ERC if you have fewer years remaining on your agreement. Let’s say your lender offers a 1% ERC in the final year of your agreement. At this point you might have also reduced your loan to £330,000. Your ERC repayment in this instance would only be £3,300. 

ERC Payment #2

Let’s say you’ve taken out a 20-year SVR mortgage loan with a 5% ERC for the duration of your loan. The less you owe on your mortgage when you sell and pay it off, the less you’ll need to pay for the ERC. For example, if you have £400,000 remaining when you sell, you’ll be charged £20,000. If you wait a few more years to pay some of it off and get it down to £280,000, you’ll only need to pay £14,000. 

When might you get an early repayment charge on your mortgage?

You won’t always be charged an ERC on your mortgage. It can depend on your lender and situation. Typically, you’ll be charged an ERC when you: 

• Pay your mortgage off before the due date.

• Overpay beyond the threshold (usually 10%) in one year. 

• Switch to a new mortgage deal before your due date.

• Port your mortgage to a new property in more than 180 days. 

• Do a partial port of your mortgage to a new property and pay off the rest (you may be charged on the non-ported part). 

When does an early repayment charge not apply?

There are numerous instances when you may not need to worry about an ERC. These include but aren’t limited to: 

• You port your mortgage to a new property in less than 180 days (you should get a full refund on your ERC).

• Have a specific mortgage loan contract that doesn’t have an ERC included.

• Only have one month remaining on your current mortgage loan agreement.

• Overpay under the 10% threshold in one year.

• Switch to another mortgage product with the same lender within the final few months of your current contract. 

• Your death or the death of your partner pays the mortgage off early.

• You make a critical illness claim in your name.

• You pay off the mortgage with funds from a divorce settlement. 

• You’re selling your home due to domestic abuse. 

• You’re selling your home due to being deployed by the armed forces.

• You’ve become a carer and need to move. 

• You’ve been made redundant and have overpaid on your mortgage using your settlement. 

What happens if your property has devalued when you sell it? 

If your house or flat has decreased in value since you bought it and you sell it for less than your mortgage loan, you could end up with negative equity. 

According to Taylor Rose, an experienced law firm specialising in property, “In the UK property market, this situation most commonly affects those who purchased at market peaks or with high loan-to-value mortgages.”

Equity is essentially your property’s value minus the amount remaining on your mortgage. If that equation works out where your mortgage loan is more than your property’s value, you’re in negative equity. 

Here’s a great example of negative equity from Money Helper: 

“If you bought a property for £250,000, and have an outstanding mortgage balance of £220,000 but the property has fallen in value to now £200,000, you would be £20,000 in negative equity.”

What you can do if you’re in negative equity

If you’re in negative equity, it may still be possible to sell your house. It depends on your mortgage lender, because you will need their approval. Some lenders won’t allow you to sell your house for less than your mortgage and you may need to wait until you’ve paid more off or the market or other factors increase its value. 

The UK Government offers advice to those who have fallen into negative equity. So before you reach out to your mortgage lender, it may be worthwhile getting in contact with someone to discuss your options. 

If your mortgage lender consents to you selling your house, you will need to repay the remaining difference not covered by the sale. This is called the ‘shortfall’. Your lender may ask you to repay it in one lump sum or offer a repayment plan. Not paying this shortfall can result in legal consequences. You can set up a payment plan with the UK Government if you qualify. 

Porting your mortgage may be possible even with negative equity, but usually only if you’re moving to a home with a lower value. If your new property’s value is less than your remaining mortgage balance, your lender might see this favourably. However, if the home’s value is more than your negative equity, it’s quite rare for a lender to approve porting. 

Being in negative equity may also make it difficult to qualify for a new mortgage agreement. However, if you may be able to find loan deals with higher interest rates that accept your situation.  

Pros and cons of selling a house with a mortgage vs when you own it outright

Although many people sell their house while paying off their mortgage, the decision to do so comes with its fair share of pros and cons. Just like any selling or buying decision you make, it’s always good to weigh these up beforehand to determine whether this route is the right option for you. 

Let’s take a look at these pros and cons compared to waiting to sell when you own your house outright. 

Selling with a mortgage

Selling when owning outright

Avoid repossession by selling your house with a mortgage

One of the biggest pros of selling your house with a mortgage is avoiding repossession. Although this is never an ideal situation, if you’ve fallen behind on your mortgage repayments, you can avoid the legal and financial ramifications of repossession by selling your house. The money you make from the sale may be enough to clear your debts and save yourself from this very stressful situation.

This is exactly what happened to one of our former clients, Mel, who needed to sell her house quickly to avoid repossession. We were able to step in and offer her a good price, helping her get through a difficult situation. 

Mel wasn’t able to make her mortgage payments and her house was close to being repossessed. We completed the sale in only two weeks and stopped the repossession from going ahead, allowing Mel to get her equity out of the house. Watch the video below to hear Mel’s full story. 

Best ways to sell a house with a mortgage

You can use the same routes for selling a house with a mortgage as you would if you owned it outright. This means you can go the traditional route with an estate agent, sell through an auction or approach a professional cash house buying company. You could also try to sell your house privately to an individual cash buyer, but you’ll need to make sure you know the cash buyer is legitimate. 

Here's a quick breakdown of the various sale routes you can take:

Is a cash buyer the right option for you?

A cash buyer isn’t the right choice for every seller. If you’re looking to sell your house quickly and avoid paying a lot in fees, we can help you do that. 

We’re also happy to buy houses from owners who are still paying off their mortgages. If you don’t want to wait to pay off your mortgage to move into your next dream home, chances are you also don’t want to wait for months to sell your house. 

You may also be concerned about market fluctuations leading to your home being devalued in the near future. If that’s the case, selling fast can help you avoid any devaluing and negative equity impacts. Fortunately, the majority of our sales complete in 2-3 weeks, but sometimes it can be as fast as 7 days. It all depends on your situation and how ready you are to sell. 

Before you reach out, I recommend learning more about why people choose to sell to us and how you can sell your house fast to The Property Buying Company. If you’ve already done a lot of research and are ready to get a no-obligation cash offer, simply submit your postcode below and one of our buyers will be in touch within 24 hours.