# Selling a condo while owing mortgage **URL:** \ **Category:** Factual Questions\ **Created:** [December 8, 2014, 3:55pm UTC](https://boards.straightdope.com/t/selling-a-condo-while-owing-mortgage/706666 "2014-12-08T15:55:08Z")\ **Posts on this page:** 20\ **Page:** 1
**Author:** ![Henryunderborn](https://avatars.discourse-cdn.com/v4/letter/h/58f4c7/32.png) [@Henryunderborn](https://boards.straightdope.com/u/Henryunderborn)\ **Post date:** [December 8, 2014, 3:55pm UTC](https://boards.straightdope.com/t/selling-a-condo-while-owing-mortgage/706666/1 "2014-12-08T15:55:08Z")
I always thought this was straight forward, but I thought I would seek, some designated specifics. 1. Buy condo for 80,000$ — put 20,000$ down 2. Owe bank 60,000$ ---- pay 1,000$ a month 3. Live there for 3 years — paid 36,000$/60,000$ owe 24,000$ 4. Sell condo for 75,000$ 5. Bank gets 24,000$ — I get 51,000$. Is that correct? What transactions are unaccounted for, dealing directly with owing the bank and selling before condo is paid off? ---
**Author:** ![Annie-Xmas](https://avatars.discourse-cdn.com/v4/letter/a/ecc23a/32.png) [@Annie-Xmas](https://boards.straightdope.com/u/Annie-Xmas)\ **Post date:** [December 8, 2014, 4:09pm UTC](https://boards.straightdope.com/t/selling-a-condo-while-owing-mortgage/706666/2 "2014-12-08T16:09:59Z")
Unless your bank doesn’t charge interest, not much of your first payments are reducing the principal. On a loan of $60,000, about half the payment is interest. So you’ve only reduced the loan by about $18,000, and the bank gets about $42,000. And some of your payments will go to property taxes. And unless you sell it yourself without a real estate broker or attorney (NOT recommended) there will be other fees involved. And anyone you owe money to can put a lien on the property, meaning you can only sell it if you pay them off. And you would have paid condo fees for three years. ---
**Author:** ![Grey](https://avatars.discourse-cdn.com/v4/letter/g/b782af/32.png) [@Grey](https://boards.straightdope.com/u/Grey)\ **Post date:** [December 8, 2014, 4:10pm UTC](https://boards.straightdope.com/t/selling-a-condo-while-owing-mortgage/706666/3 "2014-12-08T16:10:10Z")
Well you’re forgetting that your mortgage payments pay principle and interest. The amount you actually owe the bank is not actually dropping by $1000 a month. ---
**Author:** ![Henryunderborn](https://avatars.discourse-cdn.com/v4/letter/h/58f4c7/32.png) [@Henryunderborn](https://boards.straightdope.com/u/Henryunderborn)\ **Post date:** [December 8, 2014, 4:33pm UTC](https://boards.straightdope.com/t/selling-a-condo-while-owing-mortgage/706666/4 "2014-12-08T16:33:03Z")
“And anyone you owe money to can put a lien on the property, meaning you can only sell it if you pay them off.” hows that generally work? ---
**Author:** ![Grey](https://avatars.discourse-cdn.com/v4/letter/g/b782af/32.png) [@Grey](https://boards.straightdope.com/u/Grey)\ **Post date:** [December 8, 2014, 4:42pm UTC](https://boards.straightdope.com/t/selling-a-condo-while-owing-mortgage/706666/5 "2014-12-08T16:42:40Z")
[Lien](http://en.wikipedia.org/wiki/Lien#United_States) Nonconsensual liens typically arise by statute or by the operation of the common law. Those laws give a creditor the right to impose a lien on an item of real property or a chattel by the existence of the relationship of creditor and debtor. Those liens include tax liens, imposed to secure payment of a tax; “weed liens” and “demolition liens”, assessed by the government to rectify a property from being a nuisance and public hazard; attorney’s liens, against funds and documents to secure payment of fees; mechanic’s liens, which secure payment for work done on property or land; judgment liens, imposed to secure payment of a judgment; maritime liens, imposed on ships by admiralty law. ---
**Author:** ![Telemark](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/telemark/32/372_2.png) [@Telemark](https://boards.straightdope.com/u/Telemark)\ **Post date:** [December 8, 2014, 4:55pm UTC](https://boards.straightdope.com/t/selling-a-condo-while-owing-mortgage/706666/6 "2014-12-08T16:55:04Z")
> [@Henryunderborn](#): > > “And anyone you owe money to can put a lien on the property, meaning you can only sell it if you pay them off.” > > hows that generally work? > **[Lien](https://en.wikipedia.org/wiki/Lien#United_States)** > > A lien (/ˈliːn/ or /ˈliːən/)\[Note 1\] is a form of security interest granted over an item of property to secure the payment of a debt or performance of some other obligation. The owner of the property, who grants the lien, is referred to as the lienee and the person who has the benefit of the lien is referred to as the lienor or lien holder. > The etymological root is Anglo-French lien or loyen, meaning "bond", "restraint", from the Latin ligamen, from ligare "to bind". > In the United States, the t... ---
**Author:** ![md2000](https://avatars.discourse-cdn.com/v4/letter/m/73ab20/32.png) [@md2000](https://boards.straightdope.com/u/md2000)\ **Post date:** [December 8, 2014, 6:03pm UTC](https://boards.straightdope.com/t/selling-a-condo-while-owing-mortgage/706666/7 "2014-12-08T18:03:52Z")
> [@Henryunderborn](#): > > “And anyone you owe money to can put a lien on the property, meaning you can only sell it if you pay them off.” > > hows that generally work? If your lawyer did his job, there were no liens when you bought the property. Presumably if someone thought you owed them money relating to the condo (work done, taxes owed, etc.), you would have heard about it. A lien is a last-ditch effort to collect, since you may not sell for decades. Also, don’t forget some condos and the ownership association/corporation may have conditions on what you can do? I don’t recall any off-hand regarding sales, but for example limits on who or how many can live there come to mind. ---
**Author:** ![SmellMyWort](https://avatars.discourse-cdn.com/v4/letter/s/ea5d25/32.png) [@SmellMyWort](https://boards.straightdope.com/u/SmellMyWort)\ **Post date:** [December 8, 2014, 6:33pm UTC](https://boards.straightdope.com/t/selling-a-condo-while-owing-mortgage/706666/8 "2014-12-08T18:33:57Z")
> [@Annie-Xmas](#): > > Unless your bank doesn’t charge interest, not much of your first payments are reducing the principal. On a loan of $60,000, about half the payment is interest. So you’ve only reduced the loan by about $18,000, and the bank gets about $42,000. > > And some of your payments will go to property taxes. > > And unless you sell it yourself without a real estate broker or attorney (NOT recommended) there will be other fees involved. > > And anyone you owe money to can put a lien on the property, meaning you can only sell it if you pay them off. > > And you would have paid condo fees for three years. The bank may or may not include property taxes in your monthly payment. I’ve had it both ways. ---
**Author:** ![Ravenman](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/ravenman/32/2929_2.png) [@Ravenman](https://boards.straightdope.com/u/Ravenman)\ **Post date:** [December 8, 2014, 6:44pm UTC](https://boards.straightdope.com/t/selling-a-condo-while-owing-mortgage/706666/9 "2014-12-08T18:44:26Z")
> [@Henryunderborn](#): > > I always thought this was straight forward, but I thought I would seek, some designated specifics. > > 1. Buy condo for 80,000$ — put 20,000$ down > 2. Owe bank 60,000$ ---- pay 1,000$ a month > 3. Live there for 3 years — paid 36,000$/60,000$ owe 24,000$ > 4. Sell condo for 75,000$ > 5. Bank gets 24,000$ — I get 51,000$. > > Is that correct? What transactions are unaccounted for, dealing directly with owing the bank and selling before condo is paid off? Hmmm… if you were holding a 15 year mortgage on a $60,000 loan, your payments should have been closer to $500 a month, including insurance and a rough guess at property taxes. Were you making additional payments on the principal? Because if you were not, and your payment was $500 a month, at the end of three years your principal was reduced from $60,000 to about $57,500. The rest of your money went to interest, taxes, and insurance. So, in this case, you sell a house for $75,000. Subtract real estate agents fees will probably run you about $4,000 to $5,000. Subtract repaying the balance of the loan. With those out of the way, you’d probably be looking at closer to $13,000, but I have no idea what closing costs or other taxes you would be subject to. So, with the assumption that you were not actually paying down more principal than you had to, you would probably walk away with a check for less than $10,000 – certainly not $51,000. If you did make an additional $500 payment each month in order to reduce the principal, you’d probably be walking away with a check for $25,000 or thereabouts. But you should talk to a real estate agent, as I have no idea what closing costs are in your area. But there’s no way you’re getting twice as much cash as this very rough estimate. ---
**Author:** ![Morgenstern](https://avatars.discourse-cdn.com/v4/letter/m/f9ae1b/32.png) [@Morgenstern](https://boards.straightdope.com/u/Morgenstern)\ **Post date:** [December 8, 2014, 6:58pm UTC](https://boards.straightdope.com/t/selling-a-condo-while-owing-mortgage/706666/10 "2014-12-08T18:58:54Z")
> [@Henryunderborn](#): > > I always thought this was straight forward, but I thought I would seek, some designated specifics. > > 1. Buy condo for 80,000$ — put 20,000$ down > 2. Owe bank 60,000$ ---- pay 1,000$ a month > 3. Live there for 3 years — paid 36,000$/60,000$ owe 24,000$ > 4. Sell condo for 75,000$ > 5. Bank gets 24,000$ — I get 51,000$. > > Is that correct? What transactions are unaccounted for, dealing directly with owing the bank and selling before condo is paid off? That 1000 dollars per month, assuming you’re making that to a lender, includes principle and interest, condo HOA fees (most likely), proper tax (probably) and insurance on the property (most likely). You pay the majority of the interest on a loan at the beginning. I’d be real surprised of your $1000 payment dropped your principle more than $100 a month. Also there are fees a buyer pays when selling his property. These differ per locations. Not to mention Realtor fees if any. I’d bet it’s more like 75k, - 57k (mortgage) minus 3 to 10% sales costs or, you’ll net somewhere between 14 to 18k. My guess, but IANAB (banker) ---
**Author:** ![DrDeth](https://avatars.discourse-cdn.com/v4/letter/d/b487fb/32.png) [@DrDeth](https://boards.straightdope.com/u/DrDeth)\ **Post date:** [December 8, 2014, 7:19pm UTC](https://boards.straightdope.com/t/selling-a-condo-while-owing-mortgage/706666/11 "2014-12-08T19:19:01Z")
There’s also HOA/Condo Assoc dues. Which can be quite high. So high in fact, you may be unable to sell your condo. ---
**Author:** ![Orwell](https://avatars.discourse-cdn.com/v4/letter/o/dfb087/32.png) [@Orwell](https://boards.straightdope.com/u/Orwell)\ **Post date:** [December 8, 2014, 7:19pm UTC](https://boards.straightdope.com/t/selling-a-condo-while-owing-mortgage/706666/12 "2014-12-08T19:19:44Z")
You can check with your current lender for the loan payoff amount. My balance is indicated on each month’s statement. As suggested above, I would expect you to have a far higher balance than you indicate in the first post. A “mortgage payment” typically includes principle, interest, taxes and insurance (PITI), of which only “principle” pays down the loan. In addition to brokerage commissions when you sell (if you use an agent), it is common in many markets for buyers and sellers to both pay required county government recordation fees and taxes. In my market, recording fees and taxes total about 2.0 percent of the transfer price, and the seller and buyer each pay half. This does vary by custom and location. ---
**Author:** ![wolfpup](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/wolfpup/32/10618_2.png) [@wolfpup](https://boards.straightdope.com/u/wolfpup)\ **Post date:** [December 8, 2014, 7:50pm UTC](https://boards.straightdope.com/t/selling-a-condo-while-owing-mortgage/706666/13 "2014-12-08T19:50:56Z")
OP: The short answer is that none of that is even remotely correct. As mentioned by others, you forgot the mortgage interest, and for most mortgages in the initial years almost ALL the payment goes to interest and not principal. So if this is a new, say, 25-year mortgage, after 3 years you would owe approximately the same as when you started. You forgot property taxes and then on top of that either maintenance costs or condo fees, and possibly both. You forgot real estate commission on the sale which can take a big bite out of the net proceeds. If it’s a closed mortgage whose term hasn’t expired, there would be bank penalty fees. In some circumstances there could even be tax implications on the sale. The flip side of the mortgage equation is that near the end, almost all the payment goes to pay down the principal. Which is an important matter of financial principle. 😉 ---
**Author:** ![xnylder](https://avatars.discourse-cdn.com/v4/letter/x/bbce88/32.png) [@xnylder](https://boards.straightdope.com/u/xnylder)\ **Post date:** [December 8, 2014, 8:29pm UTC](https://boards.straightdope.com/t/selling-a-condo-while-owing-mortgage/706666/14 "2014-12-08T20:29:28Z")
Many others have pointed out the missing interest in the calculation, but there are also missing penalties. For example, a bank can reserve the right to issue penalties if you break the mortgage at any time other than at the end of a term. (See here for a definition of [term vs amortization](http://www.ratehub.ca/mortgage-term-vs-amortization).) If you have a 25-year mortgage divided into 5-year terms but you decide to sell after 3 years, you can be hit with heavy penalties. ---
**Author:** ![SmellMyWort](https://avatars.discourse-cdn.com/v4/letter/s/ea5d25/32.png) [@SmellMyWort](https://boards.straightdope.com/u/SmellMyWort)\ **Post date:** [December 8, 2014, 8:33pm UTC](https://boards.straightdope.com/t/selling-a-condo-while-owing-mortgage/706666/15 "2014-12-08T20:33:19Z")
> [@Morgenstern](#): > > That 1000 dollars per month, assuming you’re making that to a lender, includes principle and interest, condo HOA fees (most likely), proper tax (probably) and insurance on the property (most likely). > > You pay the majority of the interest on a loan at the beginning. I’d be real surprised of your $1000 payment dropped your principle more than $100 a month. > > Also there are fees a buyer pays when selling his property. These differ per locations. Not to mention Realtor fees if any. > > I’d bet it’s more like 75k, - 57k (mortgage) minus 3 to 10% sales costs or, you’ll net somewhere between 14 to 18k. My guess, but IANAB (banker) HOA fees…in my experience these are paid directly to the association, not the bank. In fact I’d be surprised if they are ever paid to the lender considering the residents won’t all have the same bank. Insurance…the OP put 25% down so the lender would not require PMI. Regular home-owner’s insurance is typically paid to the insurance company, not lumped in with the mortgage. ---
**Author:** ![pulykamell](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/pulykamell/32/3166_2.png) [@pulykamell](https://boards.straightdope.com/u/pulykamell)\ **Post date:** [December 8, 2014, 8:44pm UTC](https://boards.straightdope.com/t/selling-a-condo-while-owing-mortgage/706666/16 "2014-12-08T20:44:45Z")
> [@xnylder](#): > > Many others have pointed out the missing interest in the calculation, but there are also missing penalties. For example, a bank can reserve the right to issue penalties if you break the mortgage at any time other than at the end of a term. (See here for a definition of [term vs amortization](http://www.ratehub.ca/mortgage-term-vs-amortization).) If you have a 25-year mortgage divided into 5-year terms but you decide to sell after 3 years, you can be hit with heavy penalties. If the OP has a U.S. mortgage, prepayment penalties are not common. But it’s worth mentioning and checking. ---
**Author:** ![actualliberalnotoneofthose](https://avatars.discourse-cdn.com/v4/letter/a/e79b87/32.png) [@actualliberalnotoneofthose](https://boards.straightdope.com/u/actualliberalnotoneofthose)\ **Post date:** [December 9, 2014, 1:57am UTC](https://boards.straightdope.com/t/selling-a-condo-while-owing-mortgage/706666/17 "2014-12-09T01:57:02Z")
Man, I wish it worked like that. After 13 years of mortgage payments, my house is worth less than what is owed. ---
**Author:** ![Chessic\_Sense](https://avatars.discourse-cdn.com/v4/letter/c/7c8e57/32.png) [@Chessic\_Sense](https://boards.straightdope.com/u/Chessic_Sense)\ **Post date:** [December 10, 2014, 12:15am UTC](https://boards.straightdope.com/t/selling-a-condo-while-owing-mortgage/706666/18 "2014-12-10T00:15:35Z")
> [@SmellMyWort](#): > > Regular home-owner’s insurance is typically paid to the insurance company, not lumped in with the mortgage. I’ve never heard of such a thing. It’s paid with the mortgage payment and held in escrow, and the bank pays the insurance company. ---
**Author:** ![doreen](https://avatars.discourse-cdn.com/v4/letter/d/858c86/32.png) [@doreen](https://boards.straightdope.com/u/doreen)\ **Post date:** [December 10, 2014, 12:24am UTC](https://boards.straightdope.com/t/selling-a-condo-while-owing-mortgage/706666/19 "2014-12-10T00:24:09Z")
> [@Chessic\_Sense](#): > > I’ve never heard of such a thing. It’s paid with the mortgage payment and held in escrow, and the bank pays the insurance company. Meanwhile, I’ve never had a bank that collected the insurance payment and have always paid my own. Also, no escrow for the real estate taxes with my curent bank- I pay those directly as well. ---
**Author:** ![engineer\_comp\_geek](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/engineer_comp_geek/32/504_2.png) [@engineer\_comp\_geek](https://boards.straightdope.com/u/engineer_comp_geek)\ **Post date:** [December 10, 2014, 12:26am UTC](https://boards.straightdope.com/t/selling-a-condo-while-owing-mortgage/706666/20 "2014-12-10T00:26:20Z")
> [@Chessic\_Sense](#): > > I’ve never heard of such a thing. It’s paid with the mortgage payment and held in escrow, and the bank pays the insurance company. That’s the way mine was. Property taxes and insurance were all paid from the escrow account. When property taxes went up, my “mortgage” payment went up as well as I had to pay more into the escrow account. When I paid off the loan, the leftover funds in the escrow account were sent to me with a check. I thought that was the standard way of doing things so that the bank didn’t have to worry about the home owner skipping insurance payments or not paying taxes. [Next page](https://boards.straightdope.com/t/selling-a-condo-while-owing-mortgage/706666.md?page=2)