Selling a house with a mortgage in Ireland

Most homes are sold with a mortgage still on them. That is normal. The loan is paid off from the sale price on the day the sale closes, and you get what is left. This guide explains how that works, the figure your lender gives you, the fee a fixed rate can carry, where the deeds are, and what happens if the price does not cover the loan.

How the mortgage is paid off

Your solicitor handles it. A solicitor on the Law Society's register does the legal work of the sale (see conveyancing solicitor). On closing day:

1. The buyer's money arrives with your solicitor.
2. Your solicitor pays the lender the redemption figure, which clears the loan.
3. The lender releases its charge on the home, which is its legal claim over it.
4. Your solicitor takes the agent's fee, their own fee and any unpaid Local Property Tax from the proceeds.
5. The rest is paid to you.

On a €400,000 sale with a €180,000 mortgage and typical costs of about €10,775, you walk away with €209,225. The cost of selling calculator does the sum for your own figures. The guide on the cost of selling lists every line.

The redemption figure

A redemption figure is the exact amount needed to clear your mortgage on a given date. It includes the balance, the interest up to that day, and any breakage fee. Your lender must give it to you in writing on request.

Ask for one as soon as you think about selling. It tells you what the sale needs to reach. Your solicitor asks for a fresh one a few days before closing, because interest adds to it daily and a payment may have gone out.

Breakage fees on a fixed rate

A fixed rate is a rate that stays the same for a set number of years. If you clear the loan before the fixed period ends, the lender may charge a breakage fee. The fee is worked out from the lender's cost of funds under the Consumer Credit Act 1995. In plain terms, it is what the lender loses because the rates it borrowed at have moved. The lender must give you the figure in writing.

The fee can be zero. It can also be thousands of euro. It depends on how long is left on the fixed period, how much is owed and how rates have moved since you fixed. Ask for the figure before you decide to sell, not after you go sale agreed.

Some lenders let you carry a fixed rate to a new home, which is called porting. The new loan still needs a full application. If you are buying as well as selling, ask your lender whether porting is available and whether it removes the fee.

The title deeds

Your title deeds are the documents that prove you own the home. While you have a mortgage, the lender holds them. Your solicitor requests them from the lender at the start of the sale. Deeds can take weeks to arrive, and the contract for sale cannot be drafted without them. Ask your solicitor to request them the week you decide to sell. The guide on how long it takes to sell shows where this sits in the timeline.

Other debts on the home

A second mortgage, a credit union loan secured on the home, or a judgment registered against it must be cleared on closing too. Your solicitor searches for them. Each one comes off the sale price before you are paid. The calculator has a line for other secured debt.

If the sale does not clear the mortgage

Where the sale price is less than the redemption figure, you are in negative equity. The sale cannot close without the lender's written consent, because the lender's charge would not be fully paid. The shortfall does not disappear: the lender will usually ask you to agree how the rest is to be repaid.

If this is your position, talk to MABS first. MABS is the Money Advice and Budgeting Service. It is free and confidential, and its advisers deal with lenders every day. Call 0818 07 2000 or visit mabs.ie. Abhaile, run through MABS, gives free financial and legal advice to people in home mortgage arrears. The money help page lists every free route.

Then:

• Ask the lender in writing what it would accept. Lenders have processes for a sale in negative equity, and some have a negative equity mortgage for a buyer who is moving.
• Do not go sale agreed before the lender has agreed to the sale.
• Keep paying the mortgage while the sale is going through, if you can.
• If you are behind on payments, the Code of Conduct on Mortgage Arrears gives you rights, including a process called MARP where the lender must consider your case.

The Central Bank's rules are on the Consumer Protection Code page. A complaint about a lender can go to the Financial Services and Pensions Ombudsman, free of charge.

Selling and buying at the same time

Most people selling with a mortgage are also buying. The new lender needs to know the old loan will be cleared on the same day. Your solicitor lines up the two closings so the money from the sale pays off the old mortgage and goes into the purchase. Tell your lender, your agent and your solicitor early that both are happening.

Capital gains tax

Paying off a mortgage has no effect on capital gains tax. The tax is on the gain, which is the sale price less what the home cost, not on the money you receive. If the home was your main home for the whole time you owned it, there is no tax. The guide on capital gains tax when selling explains the rest.

What to ask your lender

• What is the redemption figure today, in writing?
• Am I on a fixed rate, and if so, what is the breakage fee today?
• Can I port the rate to a new home?
• Where are my title deeds, and how long will it take to send them to my solicitor?
• If the sale will not clear the loan, what does the lender need to consent?

Where this leaves you

Get the redemption figure and any breakage fee in writing, then put them into the cost of selling calculator with your expected price. The selling journey lists every step. If the figures do not clear the loan, the money help page comes first. Otherwise you can get quotes from a solicitor in your county.