I was recently asked the question, “how does one go about cancelling their mortgage when they sell their home?” It got me thinking this is probably a question that many people have and just haven’t asked it. Being immersed in the mortgage industry over the last couple of years, I’ve come a long way in understanding how it all works to get people into homes. But most people are only around this information when they are buying their home which, for most, happens only a handful of times in one’s life.
To answer the question posed at the outset, you can’t cancel a mortgage. It’s a loan that must be paid off as opposed to a payment made in exchange for a service. When moving, you start thinking, I need to cancel my cable, water, trash, etc. which are paid monthly or on a similar payment schedule. A mortgage on the other hand is a monthly payment that, at least partially, goes towards paying off the amount of money borrowed to purchase the home.
So, when you sell your home, the money earned from the purchase of the home must first go towards paying off the remaining balance owed on your mortgage. Once the mortgage has been paid off, there is no more monthly payment requirement and you are released from any obligation to the lender! If you have more questions about the mortgage process we would love to talk to you, or you can visit our webpage dedicated to helping our neighbors better understand mortgages and homeownership.