Selling Your Lexington, KY Home without Equity
Buying your own property can be a huge investment. But let’s say that you’ve recently closed the deal on your new home and have been a homeowner for only a few months or years. All of a sudden, unexpected events take a toll on your finances, and you find it difficult to keep up with your mortgage payments.
You now find yourself in a difficult position where you can’t afford your home and cannot modify your mortgage payments. To avoid foreclosure, you decide the best option is to sell your home. But given that you’ve only started paying off your mortgage, you have little to no equity on your KY home. Can you still sell your property then?
Can You Sell Property with No Equity?
The short answer is yes, you can still sell. However, if you have no equity, you’ll be selling to pay off your debts, not to gain a profit. Your home equity is the difference between how much your property is in the market and how much your remaining mortgage and other debts secured by your property is. However, given that most homeowners pay around 10 to 20 percent of the property’s value as a down payment and take out a mortgage loan to cover the rest of the sale, it’s highly likely that you have some equity in the property.
When you sell your property in this situation, much of the proceeds from the sale will go to paying off your mortgage and other debts. If you have no equity, nearly all the proceeds will go to paying off your debt and the closing costs of selling a home. But if you have some equity, it is possible to have a remaining difference after paying off your mortgage and closing costs.
Best Times to Sell a Home with No Equity
Selling a home with no equity means you’re unlikely to receive anything from the sale because everything will go towards paying your debt. However, if you’re facing financial hardship that can take time to recover from, selling your home is a much better solution than missing your mortgage payments and going into foreclosure. If you go into foreclosure, your credit score may be affected which can make it even more difficult to recover financially.
Selling your home in KY with little to no equity gives you the benefit of paying off your mortgage debt, having the flexibility to sell your home in your terms, and avoiding the effects foreclosure can have on your credit score.
Why the Costs of Selling a Home Can Affect No-Equity Sales
Even with little to no equity, you could still list your property on the real estate market. Before you do, however, keep in mind that the costs of selling a home can end up making you feel like you’re paying buyers to buy your home.
There are many costs of selling a home: repairs and renovations, real estate agent commission fees, closing costs, and more. Commissions and closing costs alone can take up to 11 percent of the purchase price. So, if your mortgage covers 90 percent of the purchase price, you may not have enough equity from the sale to cover the costs of selling your home. Thus, you’ll need to pay out of pocket – which, in your financial hardship, may be funds you do not have.
Why Selling to a Cash Homebuyer Makes Sense
A better alternative to selling a home on the real estate market is to sell directly to a cash homebuyer. Aside from the faster turnaround time to sell a home (which is just as important if you want to avoid missed mortgage payments), cash homebuyers take away a lot of the added costs of selling a home.
Cash homebuyers purchase properties as-is, so there is no need to renovate or repair a home to receive an offer. They do not charge commission fees, removing the percentage that real estate agents take. And unlike buyers who try to negotiate for homeowners to shoulder the closing costs, cash homebuyers shoulder all the closing costs. This can reduce your costs and increase the home equity you can receive when you sell.
Need to Learn More?
To recap: you can sell a home in KY with little to no equity on your home to pay off your debt. Keep in mind, however, that the less your equity is, the more likely you are to shoulder the additional costs of selling your home. To avoid these costs, sell to a cash homebuyer in Lexington, KY in a sale that does not incur these costs.
Contact Rylo Homes today to learn more about our homebuying process.