Do I Have to Pay Off my Secured Loan Before Selling my House?

You can sell your home if you have a secured loan against it, however the loan will need to be fully repaid before officially moving.

If you do have a valuable asset (e.g. your home) to use as collateral to secure against a loan, it can be a great borrowing option. Secured loans are seen as less risky by lenders and are often cheaper borrowing options. The interest rate and total repayments on the loan are often lower relative to unsecured loans.

Despite secured loans presenting many advantages, it’s important to know that the valuable asset secured against the home is at risk of being repossessed if loan repayments are not made.

Most lenders will require you to pay off your secured loan in full before moving to a new property however, there are exceptions. Some lenders may be open to the secured loan you have on the existing property being transferred to the new property. Your financial circumstances will dictate how feasible an option this will be. Namely, your ability to meet loan repayments as a borrower and the amount of equity owned in the new property.

The more equity owned in the new property and the better able you are to service loan repayments, the easier it will be to find a provider who will be willing to transfer the secured loan to the new property. One advantage of transferring your secured loan is that it can help borrowers avoid any early repayment fees. However, transferring a loan is an administrative burden, requiring lenders to provide all details needed to modify the existing deal.   

If you want to move house but can’t pay back the secured loan on the existing property beforehand, a transfer is one of your best options. It’s always advised that you speak to your lender about the options available to you. In doing so you will be empowered to make a more informed decision.

When you wish to move house but have a secured loan on your existing property, you have a few options:

• Transfer the secured loan to the new property
• Pay off any outstanding balance on the secured loan before putting the property on the market
• Pay off the secured loan with the proceeds from the sale of your home
• Borrow an unsecured loan to pay off the rest of the secured loan

There are a number of options that exist when you need to pay off your secured loan. Your best options will be determined by your own personal circumstances and your ability to service any payments taken out.  

How Does Having a Secured Loan Impact my Mortgage Approval?

If the secured loan is paid off in full once your property is sold, it shouldn’t have any adverse impact on your credit rating and as a result your ability to get a new mortgage.

When your home is sold the proceeds from the sale will be used to repay your mortgage first. (Source: Ask Susan) Only after your mortgage has been fully repaid to the lender can other outstanding secured loans be paid.

It’s possible the existing secured loan could be included into a remortgage. The eligibility however for this will depend on your financial situation, particularly your ability to meet loan repayments and the equity in the new home.

If you are struggling to repay your secured loan, it’s crucial to do all you can to keep making your loan repayments. Secured loans are very rarely written off given a valuable asset is secured against it. In the event you do stop making loan repayments on the secured loan, the asset (usually your house) could be at risk of repossession,

If you’re having trouble making payments on your secured loan, it’s vital to talk to your lender about your problems. They might be able to provide a different solution that makes your payments more manageable.