Sell Property Under Loan? Here's How to Stay in Control

Are you contemplating selling a property that still has an outstanding loan? Many Australians find themselves in this situation, wondering if it's possible and what steps they need to take. The good news is, you can sell your property even if it's still under a loan. However, the process requires careful consideration and planning to ensure a smooth transaction.

Understanding Selling a Property Under Loan

Selling a property that is still mortgaged is a common scenario in the real estate market. It essentially involves paying off your existing loan with the proceeds from the sale. The remaining amount, if any, becomes your profit. However, it's important to understand how this process works, especially in 2026, where property prices and interest rates can significantly affect your financial outcome.

Most Australian home loans are structured with the expectation that the borrower may sell the property before the loan term is complete. This means your lender is accustomed to handling such transactions. Nevertheless, the key is ensuring your sale price covers the outstanding loan balance and related expenses such as agent fees and potential early repayment fees.

Current Market Information and Loan Requirements

As of 2026, the Australian property market continues to evolve with fluctuating interest rates and changing buyer demand. Understanding these dynamics is crucial when selling a property under loan.

Interest rates for home loans currently range from 6.49% to 12%, depending on the lender and your financial profile. This rate affects your loan payoff amount and ultimately the net proceeds from your sale.

When planning to sell, it’s vital to check your loan agreement for any clauses regarding early repayment fees or penalties. Some lenders charge a fee if you pay off your loan before the agreed term. Additionally, consider the costs of selling, such as agent commissions (typically around 2-3% of the sale price) and conveyancing fees.

Steps to Selling a Property Under Loan

Here is a step-by-step guide to help you navigate the process of selling a mortgaged property:

1. Review Your Loan Agreement: Start by understanding any terms related to early payoff and calculate your outstanding loan balance.
2. Estimate Property Value: Obtain a property appraisal or consult with a real estate agent to gauge the current market value.
3. Calculate Selling Costs: Include agent fees, legal costs, and any potential early repayment fees to understand your net proceeds.
4. Choose the Right Agent: Select a real estate agent with a good track record in your area to assist with the sale.
5. List Your Property: Work with your agent to market and list your property effectively.
6. Negotiate Offers: When offers are received, ensure they are sufficient to cover your loan and selling costs.
7. Close the Sale: Once an offer is accepted, coordinate with your lender to pay off the loan and finalise the sale.

Expert Tips and Considerations

Here are some expert tips to ensure a successful sale of your property under loan:

• Communicate with Your Lender: Inform your lender about your intention to sell. They can provide a payout figure and necessary documentation to facilitate the process.
• Consider Refinancing: If your property's value has significantly increased, refinancing might be an option to get better terms or reduce penalties.
• Utilise Esteb and Co’s Network: With access to 83+ lenders, Esteb and Co can help you find competitive rates and terms, potentially saving you money.
• Plan for Taxes: Consider capital gains tax implications, especially if the property was an investment.
• Stay Informed: Keep an eye on market trends to time your sale for the best possible return.

Frequently Asked Questions

1. Can I sell my property if I’m behind on loan payments? Yes, but you should consult with your lender to discuss options, such as selling before foreclosure proceedings begin.
2. What happens if my sale price doesn’t cover my loan? You may need to cover the shortfall with savings or negotiate with your lender for a possible solution.
3. Are there legal requirements to notify my lender before selling? Yes, your lender must be informed as they need to release the mortgage on the property.
4. Can I negotiate early repayment fees? In some cases, lenders may be open to negotiation, especially if you are refinancing with them or maintaining other accounts.
5. Is it better to sell or refinance? This depends on your financial goals. Selling can provide immediate funds, while refinancing might offer better loan terms.
6. How does the cooling-off period affect my sale? In some states, buyers have a cooling-off period during which they can cancel the contract. Be prepared for this possibility.
7. Can I use sale proceeds for another property purchase? Yes, many sellers use proceeds to fund a new home purchase, often coordinating the timing to minimise transition periods.