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Behind on Mortgage Payments: Can You Sell?

Behind on Mortgage Payments. Can I Sell My House?

Ever since the unforeseen disruptions and financial hardship brought on by the COVID-19 pandemic, the American dream of homeownership hasn’t been all merry. The cost of living is continuously soaring, leading to an increasing number of homeowners defaulting on their monthly mortgage payments.

If you’re struggling to finance your mortgage loan payments, you can seek a loan modification or mortgage forbearance. Unfortunately, if the deferred payments have already piled up, it may be hard to negotiate with your mortgage lender. This is when most homeowners decide to sell their house to pay what they owe. You may also risk losing your house because of late taxes and fees.

But can I sell my home if I’m behind on payments? The answer is yes. It’s possible to sell a home even when you’re behind on payments so long as it’s not yet foreclosed. However, time is of the essence.

Based on how far behind you are, it becomes more difficult and less financially advantageous the longer you wait. Luckily, we have outlined everything you need to know about selling your home if you get behind on mortgage repayment.

Selling Your House if You’re Behind on Your Mortgage

If you’re behind on mortgage payments, selling your house before the foreclosure process is sometimes the best way to settle your loan. You can use the proceeds to settle the outstanding balance or even make a profit from the sale.

While selling a house when you’re behind on payment might seem difficult “on paper,” it isn’t, especially if you have a clear picture regarding real estate sales. To help you navigate through the home sale process, here are your four main options:

  • Make a short sale
  • Sell your home through a real estate agent
  • Sell your house through an FSBO sale
  • Sell to cash buyers

Make a Short Sale

A short sale refers to selling a home for less than what is owed. Because the lender loses money with a short sale, you should request their permission before proceeding with this sale.

For a short sale, you must present a hardship letter. This letter should outline the reasons why you can no longer settle your mortgage installments, such as job loss, medical expenses, divorce, and more, as well as a reasonable cash offer from a prospective buyer.

Note, in short sales, you only sell the house to pay off the mortgage and walk away with no benefits from the sale. Nonetheless, short sales are still a better solution to foreclosures as they have less serious consequences for your credit.

Similarly, some lenders prefer short sales over repossessing and foreclosing homes to avoid the hassle of owning and selling property.

Sell Your Home Through a Real Estate Agent

If the value of your home is higher than your outstanding mortgage balance, but you are behind on your mortgage, you need to worry not! You can still sell your home for its worth through a real estate agent.

Unfortunately, selling a home takes time, from listing and scheduling open houses and showings to assessing offers and more. If you’re behind on repayments, you don’t have much time, so it’s best to source an agent with low DOM (Days on the Market).

A DOM shows the average number of days a property spends on the open market before sale. Thus, an agent with low DOM implies they can sell your home faster, eliminating your mortgage troubles sooner.

The only drawback to selling through an agent is that home sellers must pay them some commission. Besides, your realtor may not recommend selling the home as-is and suggest renovations to enhance the property’s appeal and lure potential buyers, leading to additional upfront expenses. 

Sell Your House Yourself Through for Sale by Owner (FSBO)

If you don’t want to hire a real estate agent, you can sell your home on your own through FSBO. The only disadvantage to this option is that the entire process can be overwhelming. You must invest a lot of energy and time for a successful sale at a fair market value.

Sell To Cash Buyers

When selling a home on the open market, the entire process is full of uncertainties. While you and/or your agent will market the property in the best way possible, there’s no telling when a potential buyer will come or whether you’ll get a fair cash offer.

Once you find a buyer, you’ll also have to wait before their lender can approve their loan. This wait can be quite stressful and take up the limited time you have before a foreclosure notice.

Avoid all these hassles and sell your house fast in Appleton to a cash buyer. Independent from lenders, real estate investors, and cash home-buying enterprises don’t have delays for approvals! Besides, we buy houses in Green Bay, Wisconsin—we can help you out.

Nevertheless, the convenience that cash buyers offer still comes at a cost. To guarantee a good profit margin to the investor, they often purchase your home for less than its market value. The investor takes up responsibility for any renovations, repairs, and any relevant paperwork with your lender.

Selling Your House if You’re Behind on Your Mortgage

Above Water and Below Water Definitions

If you’re considering selling your house to pay off your home loan, understanding whether your property is above water or below water is crucial.

Above Water

If the value of your house exceeds the amount you owe, you’re “above water” In this case, you can simply sell your home and finance your mortgage. The house sale can sometimes also give you some profit.

An “above water” home sale doesn’t harm your credit score. In fact, you can use these proceeds to take up another mortgage plan.


On the other hand, being “underwater” on your mortgage means the outstanding mortgage balance is higher than the current value of your property. This situation can happen if property values are failing.

Being in an underwater mortgage is devastating as it reduces your chances of obtaining a refinancing. Your mortgage lender probably also won’t approve the sale of your home unless you have the cash to pay the outstanding mortgage out of pocket.

Alternatives To Selling Your Home When Underwater

While you might already think that selling your house is the only solution when falling behind on mortgage payments, you have alternatives to help you get back on track and prevent pre-foreclosure. These include:

  • Request a mortgage forbearance
  • Loan modifications
  • Mortgage Refinancing
  • File for bankruptcy

Request a Mortgage Forbearance

A mortgage forbearance is a temporary relief or an extended grace period” offered by the lender. Simply put, the lender won’t collect repayment from you for a certain duration till you get your finances on track.

Depending on the agreement with your lender, this grace period can last for months to even years. The bank or mortgage servicer will usually demand a “proof of hardship” that demonstrates why you’re unable to pay your mortgage and might also ask how you plan to repay the remaining balance.

Loan Modifications

A loan modification is an agreement between your bank or lender to change the terms of your initial mortgage loan to help you avoid foreclosure. Your mortgage provider can extend the payment duration, reduce your installments, interest rates, and more. This helps you avoid hurting your credit score.

To obtain a loan modification, you should file a request for mortgage help and submit some financial documents. These include your income statements, bank statements, pay stubs, utility bills, and monthly mortgage statements.

Mortgage Refinancing

Mortgage refinance refers to replacing your current mortgage with a new home loan with different terms. As with a loan modification, a borrower can negotiate with their lender to modify the new mortgage terms when refinancing.

File for Bankruptcy

If you’re a wage earner but currently experiencing financial difficulties, another alternative to selling your home underwater is filing for Chapter 13 bankruptcy. Here, you can negotiate with your lender to pay the mortgage in installments, usually within 3-5 years.

While filing for bankruptcy can help you avoid selling your home and eventually foreclosure, it should always be your last resort because it significantly affects your credit report.

Should You Sell Your Home if You’re Behind on Mortgage Payments?

There’s no one answer to whether you should list your property if you’re behind on payments. It’s a personal choice that depends on various factors, such as financial situation, market conditions, credit consequences, alternatives, and your long-term plan.

If you cannot catch up on missed payments and don’t see a solution in sight, selling your house might be a practical option.

You should also assess the market conditions and the equity of your home to have an accurate estimate of your sales price. You can more easily sell your home in a seller’s market than during a buyer’s market. Likewise, if you’re above water, selling your home will potentially pay off, compared to selling underwater.

Before selling, you should also understand how it will affect your credit. For instance, selling below water will affect your credit more than selling above water.

Another key consideration is the alternatives to selling. If one of these alternatives can help you catch up on missed mortgage payments, you can put a hold on your home sale. If none is viable to you, you can proceed with the sale.

Selling Your House When Behind on Mortgage Payments

You can still sell your home if you fall behind on your mortgage payments. However, it’s crucial to consider other factors unique to you to determine if selling is the best option.

Are your financial woes temporary or permanent? Is the real estate market condition favorable to sellers? What’s the property’s equity, and how will it affect my credit?

If you don’t want to let go of your property, there are various alternatives to explore. For professional advice, you should consult a knowledgeable real estate agent. 

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