Selling a House With a Mortgage in New York

The short answer: yes. You do not need to pay off your mortgage before you sell. Your attorney gets a written payoff figure from your lender, the loan is paid at the closing out of the sale price, and the lender then records a satisfaction of mortgage that clears it from the property’s record. What you receive is the sale price minus the payoff and your selling costs. If the price will not cover what you owe, the lender has to approve a sale for less than you owe.

How the payoff works, step by step

1. List every loan on the home. Tell your attorney about every mortgage, home-equity loan, home-equity line of credit and other debt secured by the property. A title search helps identify recorded mortgages and liens, but disclosing these obligations early can prevent delays at closing.
2. Your attorney requests the payoff statement. Under the federal rule for loans secured by a home (12 CFR 1026.36(c)(3)), the servicer must send an accurate payoff statement no more than seven business days after a written request. For an owner-occupied home of one to six families, or a condo unit, Real Property Law §274-a also requires the lender to deliver it within thirty days of a written demand from you or your attorney, and not to charge for the first one.
3. The payoff is not your statement balance. As the CFPB explains, the payoff amount includes interest through the day the loan is paid, so the statement gives a daily interest figure. Under §274-a it shows the principal, the interest and any other charges your loan documents allow.
4. An updated figure for the closing day. Because interest runs daily, the attorney or title closer works from a payoff statement good through the closing date.
5. The lender is paid at the closing. At closing, your attorney or title closer generally arranges for outstanding mortgage balances to be paid from the sale proceeds. The remaining proceeds are then distributed to you after other closing costs and adjustments.
6. The lender records a satisfaction. Under RPAPL §1921, once the loan is paid in full the lender must sign a satisfaction of mortgage and arrange to have it presented for recording within thirty days. For an owner-occupied home of one to six families or a condo unit, if it has not been delivered within ninety days, the law gives an attorney a way to clear the mortgage by affidavit.

Home-equity lines

A home-equity line of credit is paid off at closing the same way, and the federal seven-business-day payoff rule applies to it too. The difference is that a line can be drawn on again after it is paid down, so it has to be closed, not just brought to zero. RPAPL §1921 ties the satisfaction of a credit line mortgage to a written request.

• If you have a home-equity line of credit, paying the outstanding balance may not automatically close the account. Your attorney or title closer should coordinate the lender’s requirements for closing the line and releasing its lien, including any necessary written authorization.
• Do not write a check or make a draw on the line once you have a payoff figure. A draw after that date is not on the statement.

Co-op apartments

A co-op loan is generally secured by your shares in the cooperative corporation and your proprietary lease rather than a mortgage on real property. At closing, the loan is paid off and the lender’s security interest must be released so the shares and proprietary lease can be transferred to the buyer. The precise document-release process depends on the lender and closing arrangements.

What will I have left?

A rough way to see your equity before you talk to anyone:

1. Get an instant home valuation. Where there are enough recent comparable sales near you, it gives an estimated range based on them. It is a starting point, not an appraisal and not a sale price: comparable sales cannot account for the condition of your home or the improvements made to it.
2. Subtract your payoff figure, including any home-equity line.
3. Then subtract your selling costs. What sellers pay at closing covers each one: transfer tax, commission, legal fees and the rest.

What is left is a rough picture, not a promise. The figure that counts is the one on the closing statement your attorney prepares.

If you owe more than the home will sell for

This is sometimes called being underwater. There are two ways to sell:

• Bring the difference to closing. If you can cover the gap yourself, the sale works like any other.
• Ask the lender for a short sale. The CFPB describes a short sale as a sale of your home for less than what you owe on your mortgage, and it needs the lender’s agreement. A short-sale lender typically reviews the proposed contract, the seller’s financial circumstances and information about the property’s value before deciding whether to approve the sale. Requirements vary by lender, and approval is not guaranteed.

Three things to know before you sign anything:

• The remaining balance. The CFPB advises asking the lender to waive the shortfall (the deficiency) before closing, and getting that waiver in writing. If the approval letter does not waive it, the lender may still pursue it.
• Taxes. A balance that is forgiven can bring a tax liability, the CFPB notes. Speak with a tax professional.
• Help. If you are behind on payments or have received a foreclosure notice, speak with an attorney now. The CFPB also points homeowners to HUD-approved housing counselors.

Have your attorney review a short-sale approval letter before you sign it. We can provide the recent comparable sales and market information a lender asks for when it reviews a short sale.

How a short sale works in New York, and how it compares with foreclosure and a deed in lieu →

Common questions

Can I sell my house if I still owe on the mortgage?

Yes. You do not need to pay off the mortgage before you sell. The loan is paid off at the closing out of the sale price, and you receive what is left after the payoff and your selling costs. If the sale price will not cover what you owe, the lender has to approve a sale for less than you owe, which is called a short sale.

Who pays off my mortgage when I sell?

The payoff comes out of the buyer's money at the closing. Your attorney orders a written payoff statement from your lender before closing, and at the closing the amount on it is sent to the lender from the sale proceeds. You do not pay it off yourself first.

Is my payoff amount the same as my loan balance?

No. The federal Consumer Financial Protection Bureau explains that the payoff amount is different from the current balance on your statement: it includes the interest due through the day the loan is paid off, and the lender's payoff statement shows a daily interest figure for that reason. It can also include other charges your loan documents allow.

How long does my lender have to send a payoff statement?

Under the federal rule for loans secured by a home, the servicer must send an accurate payoff statement within a reasonable time and no more than seven business days after a written request. New York Real Property Law section 274-a also requires the lender on an owner-occupied home of one to six families, or a condo unit, to deliver the payoff statement and related documents within thirty days of a written demand from you or your attorney, without charge for the first one.

What is a satisfaction of mortgage?

It is the document that shows the mortgage has been paid in full, recorded with the county clerk (or the City Register in Queens and Brooklyn) so the lien comes off the property's record. Under New York RPAPL section 1921, once the loan is paid in full the lender must sign the satisfaction and arrange to have it presented for recording within thirty days.

What happens to my home-equity line when I sell?

It is paid off at closing like the mortgage, from the sale proceeds. A zero balance is not the same as closing the line: a home-equity line can be drawn on again, and New York law ties the satisfaction of a credit line mortgage to a written request. Your attorney or title closer should coordinate what the lender requires to close the line and release its lien. Do not draw on the line once you have a payoff figure.

What if I owe more than my house is worth?

You can bring the difference to the closing yourself, or ask the lender to approve a short sale, a sale for less than you owe. A short sale needs the lender's written approval, and the approval letter should say whether the lender waives the remaining balance; if it does not, the lender may still pursue it. A forgiven balance can also have tax consequences. Have your attorney review the letter, and speak with a tax professional, before you sign.

Sources (checked 2026-10-23)

• New York Real Property Law §274-a (payoff statements and mortgage-related documents)
• New York Real Property Actions and Proceedings Law §1921 (discharge of mortgage)
• Consumer Financial Protection Bureau, Regulation Z, 12 CFR 1026.36(c)(3) (payoff statements)
• CFPB, What is a payoff amount and is it the same as my current balance?
• CFPB, What is a short sale? and What is a deed-in-lieu of foreclosure?

Joseph DeVito is a New York Licensed Associate Real Estate Broker and a New York attorney. He does not act as both broker and attorney on the same transaction: here he acts as a real estate broker only, and he is not your attorney. Real estate services provided through Keller Williams Realty Greater Nassau are not legal representation. Everything on this site is general information for educational purposes only. It is not legal advice, it creates no attorney-client relationship, and it should not be relied on as legal advice — for advice about your own situation, consult your own attorney.

This page is general information, not legal, tax or lending advice for your sale. Your payoff, any charges in your loan documents and the terms of a short-sale approval depend on your own loans, so confirm them with the attorney handling your sale. We do not recommend lenders.

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