Selling a house with an outstanding mortgage: how the repayment works

Selling a house with an outstanding mortgage: how the repayment works

Selling a house with an outstanding mortgage is perfectly possible in Belgium: the notary pays off your home loan from the sale price on the day of the deed. You therefore do not need to repay the loan yourself beforehand. You will, however, usually pay a reinvestment fee and the costs of the mortgage release. This article explains how that works in practice and what to watch out for as a seller.

What happens to your loan when you sell?

A buyer always acquires your home free of any charges. The mortgage your bank holds on the property must therefore be removed before or at the moment ownership transfers. In practice, the notary arranges this for you.

Once the sales agreement (compromis) has been signed, the notary asks your bank for the exact amount still outstanding on the planned date of the deed. That amount covers the remaining capital, the interest accrued up to that day and the fee for early repayment. On the day of the deed, the buyer (or their bank) pays the purchase price into the notary's third-party account. The notary uses it to repay your bank first and then transfers the balance to you.

So you do not need to cancel the loan with your bank yourself. Do let the notary and the bank know in good time who handles your file, so the repayment statement is ready on time. A correct asking price also helps here: the closer it is to the market, the smaller the chance of a shortfall. A free valuation gives you a realistic starting point in advance.

What does it cost to repay your mortgage early?

With a mortgage loan for a home, the bank may charge a reinvestment fee when you repay earlier than planned. For consumer credit, that fee is capped by law at a maximum of three months' interest on the capital you repay early, calculated at your loan's interest rate. This rule is set out in Book VII of the Code of Economic Law.

An example of how it works: if 150,000 euros is still outstanding at 3% a year, three months' interest comes to roughly 1,125 euros. Your own amount depends on your interest rate and the outstanding capital. Your bank provides the exact figure in the repayment statement.

On top of that come the costs of the mortgage release, the deed by which the mortgage registration is officially cancelled. These costs consist of the notary's fee and administrative charges, and they appear as a separate line on the notary's statement. Ask your notary for an estimate in advance, as the amounts are adjusted periodically. You will find an overview of all other items in our article on the costs of selling a home. If you are not selling but simply want to repay early, read more in early mortgage repayment.

How does the mortgage release work, step by step?

1. Sales agreement signed. Your estate agent or the buyer sends the sales agreement to the notary, who opens the file.
2. Mortgage search. The notary checks which registrations are held on your home. Sometimes there are more than you expect, for example an old loan or a mortgage mandate.
3. Repayment statement from the bank. The bank provides the amount needed on the date of the deed to pay everything off.
4. Deed and payment. On the day of the deed, the notary repays the bank from the purchase price.
5. Cancellation. After payment, the bank gives its consent to strike off the registration. The notary arranges the cancellation in the mortgage register. The bank also drops any mortgage mandate.

For you, there is little to notice. All you do is pass on the details of your loan and your bank and check the notary's statement.

What if the sale price is lower than your outstanding loan?

This is called a residual debt. As long as the bank has not been fully repaid, it will not consent to the mortgage release, and without the release the sale cannot go ahead free of charges. You then have to make up the difference yourself on the day of the deed, from savings or another source.

If that is not possible, contact your bank as early as you can, before you sign a sales agreement. Banks are sometimes willing to look for a solution, such as a repayment plan for the shortfall, but you have no right to one. A residual debt mainly occurs with recently bought homes, shortly after refinancing or with a loan that covered almost the full purchase price.

A good estate agent looks at the market value with you before setting an asking price. Through ImmoMakelaarVergelijker you can request free proposals from up to three BIV-accredited estate agents in your area and compare their estimates side by side.

What should you watch for with your insurance and a new purchase?

Once the loan is repaid, your mortgage protection insurance also loses its purpose. Ask your insurer how the policy ends and whether part of the premium will be refunded, especially if you paid a single premium. Your home insurance only stops once you tell the insurer the property has been sold. Only do that after the deed, because until then you carry the risk.

Are you buying a new home before the old one has sold? A bridging loan can then cover the gap between the two transactions. Some banks also let you transfer your existing loan to a new home, so you avoid the reinvestment fee. Read more about this in taking your mortgage to a new home. Discuss both options with your bank before you make an offer on another property.

Frequently asked questions about selling with an outstanding mortgage

Can I sell my house if the mortgage has not been paid off yet?

Yes. In Belgium you can simply sell a home with an outstanding mortgage. The notary pays off the loan from the purchase price on the day of the deed and only transfers the balance to you. You do not need your bank's permission in advance to sell.

How much is the reinvestment fee when you sell?

With a mortgage loan for a home, the reinvestment fee is capped by law at a maximum of three months' interest on the capital repaid early. The exact amount depends on your interest rate and your outstanding capital and is shown in your bank's repayment statement.

Who arranges the mortgage release?

The notary who draws up the deed of sale. They request the repayment statement from your bank, repay the bank from the purchase price and then have the mortgage registration cancelled. The related costs appear on the notary's statement.

What happens if my sale price does not cover the loan?

Then you have to make up the shortfall yourself on the day of the deed, because the bank only consents to the mortgage release once everything has been repaid. If you expect a residual debt, contact your bank before you sign a sales agreement.

In conclusion

An outstanding mortgage does not stand in the way of a sale. The notary pays off the loan, you pay the reinvestment fee and the mortgage release, and you receive the balance. The real risk lies in an asking price that is off. So start with a free valuation and then compare up to three BIV-accredited estate agents free of charge and without obligation through ImmoMakelaarVergelijker.