Expert: Dick Dennis - 8/30/2007

Question
I see your answer from last year about selling a home with a 2nd mortgage.  I
understand that if I sell the home, I'd be responsible for both mortgages.  Do
banks let you put homes up for sale with a 2nd mortgage on them?  Or do
you first have to pay off the 2nd mortgage?  It seems most logical that you
would be able to sell a house as long as the proceeds covered both
mortgages.  Am I wrong?

Thanks for your help.

Answer
You don't have to worry about any and all mortgages, Mimi . . . . except to make sure you have enough equity over and above the total of any and all of the mortgages recorded against your property. When you sell the property, the title company will make sure that all the mortgages are paid off before it is passed on to the buyer. The buyer will be putting his down payment. He will be getting a new mortgage loan. Those two together should be able to pay off any and all mortgages you have on your property.

If not, then you are in what is called a "short pay" position. The mortgage holder MAY (or may not) allow you to sell the property for less than what you owe. But the lender will make sure you do not get a dime out of the closing. I do wish you well.

Dick Dennis