Selling a house that still has a mortgage is very common in California. In fact, according to the California Association of Realtors, fewer than 12% of homes statewide are owned free and clear — meaning nearly nine out of ten sales involve an existing mortgage. So the short answer is: yes, absolutely, you can sell your home even if you still owe money on it.
But how it works — especially for distressed homeowners — depends on equity, loan type, and your situation. This guide breaks everything down clearly.
This article supports our foreclosure and as-is pillars. If you’re worried about falling behind on payments, you may also want to read our guides on selling a house as-is in California or what to do if you’re facing foreclosure. You can also check out how to sell a vacant house fast in California if the property is empty.
How Selling a Home With a Mortgage Works
When you sell your house, your mortgage is paid off at closing using the buyer’s funds.
It happens automatically:
- The escrow company contacts your lender
- They request a mortgage payoff statement
- The payoff gets deducted from your sale proceeds
- Any leftover money goes to you
If there isn’t enough money to pay off the mortgage, that’s when options like a short sale come into play (more on that later).
Why So Many California Homes Sell With a Mortgage
California’s high prices mean most owners keep mortgages for decades.
A few quick stats:
- As of 2025, the median home price in CA is over $900,000
- The average mortgage balance in the state is $422,000+, one of the highest in the nation
- Homeowners stay in their homes an average of 7.5 years, well before they pay off their loans
This is why selling before a mortgage is paid off is totally normal.
How Much Equity You Need to Sell
You don’t need your home paid off — you just need enough equity to cover:
- Your mortgage payoff
- Transfer taxes
- Escrow fees
- Commissions (if using an agent)
- Any outstanding liens
- Repairs or credits to the buyer (only in traditional sales)
A simple rule of thumb:
If you have at least 10% equity, you can typically sell smoothly.
Example: Susan in Pasadena
Susan came to us when she needed to move closer to her aging parents. She still owed $498,000 on her mortgage. Her home sold for $740,000, covering the loan, closing costs, and leaving her with roughly $210,000 in net proceeds.
What If You Have Little or No Equity?
If your mortgage balance is close to (or higher than) your home’s value, you still have options.
Option 1: Sell to a Cash Buyer As-Is
Cash buyers like Mrs. Property Solutions can often close even with tight equity situations because:
- No agent commissions
- No repairs
- No lender delays
- No appraisal issues
Example:
A seller in San Bernardino owed $312,000 on a house worth around $330,000, but it needed $20,000 in repairs. A traditional sale made no sense. We purchased it as-is, paid off the loan, and helped the seller walk away debt-free.
Option 2: Short Sale
If your home is worth less than what you owe, your lender may approve a short sale. The Consumer Financial Protection Bureau explains that in a short sale, the lender agrees to accept less than the full payoff amount if the seller is truly unable to cover the full loan.
Option 3: Reinstatement or Loan Modification
If you’re behind on payments but want to keep the home, lenders may offer:
- A payment plan
- Forbearance
- A modification to reduce the monthly payment
What Happens if You’re Behind on Payments?
Being behind does not stop you from selling — even if you’ve received:
- A Notice of Default (NOD)
- A Notice of Trustee Sale (NTS)
- A scheduled auction date
California allows homeowners to sell up until the moment the auction begins.
Example: Robert in Lancaster
Robert was 5 payments behind and only 18 days away from his foreclosure auction. We worked with the trustee, paid off the arrears, and closed the sale just in time.
Selling a House With a Mortgage: Step-by-Step
1. Get Your Mortgage Payoff Amount
This is not the same as your loan balance. The payoff includes interest, late fees, and lender charges.
2. Decide How You Want to Sell
Options include a traditional listing, a cash buyer, or a short sale.
3. Escrow Pays Off the Mortgage Automatically
You don’t have to handle negotiations — escrow handles everything.
Selling a Mortgaged Home As-Is
Most distressed sellers choose an as-is sale, especially if:
- The home needs repairs
- Tenants occupy the property
- There are code violations
- Foreclosure is looming
- You need a fast sale
Example: The Alvarez Family in Van Nuys
The Alvarezes inherited a home with significant deferred maintenance and still owed $267,000. We bought it as-is and paid off the loan, leaving them with a clean exit.
What About FHA, VA, or Adjustable-Rate Mortgages?
Great news — loan type doesn’t matter.
Even with FHA loans, payoffs follow HUD guidelines.
You can also sell with:
- VA loans
- USDA loans
- Jumbo loans
- Reverse mortgages
- HELOCs
- Second mortgages
Can You Sell a House With Multiple Mortgages or Liens?
Yes — but everything must be cleared or negotiated during closing.
According to ATTOM Data, roughly 9% of California homes carry multiple liens or secondary financing.
Escrow can pay off:
- 1st mortgage
- 2nd mortgage
- HELOCs
- Tax liens
- Judgments
- HOA liens
Example:
A seller in Glendale had two mortgages and an IRS lien. We coordinated everything with title, negotiated the payoffs, and allowed her to close without paying out of pocket.
Benefits of Selling With a Mortgage Still on the Home
- Stop payments immediately
- Pay off debts
- Avoid foreclosure
- Walk away from costly repairs
- Move quickly
- Protect your credit
How Mrs. Property Solutions Can Help
If you’re feeling overwhelmed by your mortgage or worried about falling behind, we specialize in helping homeowners sell with a mortgage still on the property. Whether you’re behind on payments or need a fast closing, we can pay off your loan and close on your timeline.