Selling a Home with Equity

Home equity is the difference between the market value of your home and the amount you owe on your mortgage and other debts secured by the home. If you sell a home in which you have equity, you can keep the difference once closing costs are paid and use it for new housing, other expenses, or savings.

If you have a financial hardship but prefer to stay in your home, make sure you talk to your mortgage servicer first to see if mortgage relief options are available that can help you keep your home.

I can no longer afford my home, but don’t want to lose the equity I’ve accumulated or face foreclosure.

Selling Your Home

What is a sale with home equity?

When your home is worth more than you owe on your mortgage and other debts secured by the property, the difference is called home equity. If you sell the home—a sale with equity, or equity sale—you can keep the excess funds once all debts and closing costs are paid. Selling a home with equity is an option if you have a financial hardship and can no longer afford the home, or if you simply want to exit the home for other reasons such as relocating or taking advantage of a strong real estate market.

A sale with equity is an alternative to foreclosure you should consider if you:

  • Can no longer afford your home
  • Are ineligible to refinance or modify your mortgage
  • Are facing a long-term hardship

What are the benefits of a sale with home equity?

  • Pay off your remaining mortgage debt
  • Benefit from the equity in your home by keeping your share of the proceeds from its sale
  • Use your proceeds for new housing, other expenses, or savings
  • Avoid the damage to your credit caused by a foreclosure
  • Have more flexibility and control over exiting your home

What is the process for a sale with home equity?

  • Determine your equity and the financial costs and benefits of selling
  • Find a local listing real estate agent
  • List with your agent and follow any recommendations to get your home ready
  • Work with your agent to market your home
  • Negotiate offers and close

You may also want to consider other home listing options such as online marketplaces that may reduce your selling costs.

For additional information, visit our Sell section, where we’ve broken down the process into three categories:

Next steps

Step 1

Contact your mortgage servicer—If you’ve missed or may miss a mortgage payment, explain your situation including any financial hardships. If you want to keep your home, see if there are any options based on your circumstances. If you have a short-term hardship, you may qualify for mortgage relief that helps you get back on track without selling your home:

If you have a long-term hardship and are not able to keep your home, tell them you’re planning to list the property for sale and discuss your options. You may qualify for a payment forbearance that lets you reduce or suspend your mortgage payments while you market and sell your home, helping to protect your credit rating.

Make sure you have your basic financial and loan information on hand when you call, including mortgage statements and income details.

Note that if you are already behind on your mortgage payments, those debts will be paid as part of the closing process when you sell, as they are included in the mortgage payoff amount.

Step 2

Contact a licensed real estate agent—Tell them you’re interested in listing your home for sale (if you have not already done so). You’ll work with them to:

  • Determine market value and pricing
  • List the property on a real estate multiple listing service
  • Prepare your property for sale
  • Market your home

You can also sell your home without an agent by listing it for sale by owner or using a nontraditional home listing service such as an online marketplace that may reduce your selling costs. There are pros and cons for each, but unless you’re experienced at selling homes, it usually makes financial sense to get professional help.

For additional information, visit our Sell section, where we’ve broken down the process into three categories:

Step 3

Negotiate offers and close—Your real estate agent will work with you to evaluate and negotiate offers on your home.

Once you and the buyer agree on the sales price and other terms, each party will formally accept by signing the sales contract.

The last step is closing on your home sale, sometimes called the settlement. An escrow or title company usually manages the closing, during which you sign the documents that finalize the sale.

Note that if you are behind on your mortgage payments, that balance will be paid as part of the closing process when you sell, as it is included in the mortgage payoff amount.

For additional information, visit our Sell section and view Finalizing the sale.

If you need further assistance (before or after contacting your mortgage servicer), contact a Housing Counselor.