When you’re planning a home sale, one of the first things on your mind is likely what happens to your mortgage when you sell your house. You’re not alone — this is a common question, especially among first-time home sellers.
Whether you’ve built up significant equity over time or still have years left on your mortgage, knowing what to expect from your mortgage payoff when you sell can help you plan your next move.
Before we explore what happens to your mortgage when you sell your house, let’s review what has hopefully happened since you bought your home.
Get a Free Home Value Estimate
Enter a few details about your home and we’ll provide you with a preliminary estimate of home value in less than two minutes. This won’t be a guarantee of what your home will sell for, but it is a helpful starting point.
How does equity grow while paying your mortgage?
Equity in your home grows over time, mostly through mortgage payments and the natural appreciation of property value. But other factors, like improvements you’ve made, can also boost your equity.
Over the past decade, U.S. home values have risen on average at a rate of about 5% annually. In the last five years, this growth has accelerated to an average of 8% per year, according to data from the Federal Housing Finance Agency (FHFA) and the U.S. Department of Housing and Urban Development (HUD).
Your home’s equity is comprised of:
- Your original down payment
- Your home’s gains in value through appreciation
- Your mortgage principal payments
- Increase in value from improvements you’ve made
