One of the essential homeowners’ questions when planning the sale of their house is how much money they would get when sold. It might be a straightforward question. However, it can’t be easily determined as it has a lot of factors in the equation. Not only that, but there are also some taxes and fees you have to pay for yourself when you sell the house.
One of the payments you have to consider is the outstanding mortgage balance you have to pay before you can sell it. The amount you have to pay for it is to determine the interest of your last payment until the day your house is sold. Sometimes, sellers also have to pay for a transfer tax when your house is sold, not to mention incidental closing costs.
However, if you have a second mortgage, you can pay for all of these. But if you don’t, these costs will nibble away at your net proceeds, which can potentially do you more harm than good. It is essential to know how much net proceeds from a home sale you can get and how a net proceeds calculator helps you in a house sale.
What are net proceeds?
Before we tackle how a net proceeds calculator can help you, let’s talk about what net proceeds are first. You might think it’s not very easy, but it’s pretty straightforward. Net proceeds are the amount sellers receive after they manage to sell their assets with the additional expenses and costs deducted from the gross proceeds.
The additional expenses can only have a small percentage on the gross income, leaving you with significant net proceeds depending on how much you have sold your asset. However, if the asset hasn’t sold that much, it might significantly impact your gross proceeds, leaving you with very little on your net proceeds.
It is essential to note the additional expenses, like advertising costs, government fees, and maybe commissions. Moreover, see if these expenses will be substantial when deciding on the price of the house. Pricing your house below the average mark, not considering the additional costs of selling the house, can leave you with too little net proceeds.
Importance of a Net Proceeds Calculator
A net proceeds calculator makes it simple for anybody with no experience in selling a house to quickly estimate the gross proceeds, the additional expense that comes with selling the house, and, ultimately, the net proceeds that will fall into that person’s pockets.
All you have to do is fill in the vital information, like the sales price, the mortgage information, the closing date, etc., and let the net proceeds calculator do the work for you. The additional expenses will depend on the information you have given and other factors. Also, there are net proceeds calculators on the internet that ask for more important information to estimate your net proceeds accurately.
The estimation made on net proceeds calculators does not include other factors after the sale, like your remaining mortgage balance and your other debts. The estimation will only show you the net proceeds you have after the additional expenses are deducted. If your total net proceeds are less than the outstanding balance you have left on your mortgage, you still need to pay for that.
Also, net proceeds calculators don’t include “soft costs” that are often associated with selling the house. Some of these soft costs are the maintenance you have to do in your house, staging, and the amount of money you are willing to haggle.
Using a net proceeds calculator will make you encounter some new terms you have to get familiar with. It is essential to know these terms and their definitions if you want to use the calculator efficiently and have a more accurate estimation. Here are some of them.
Estimated Closing Date – The estimated closing date is the exact date the home sale is taking place. This data is used to determine how much you still have to pay for the final interest of the mortgage and other taxes.
Mortgage One Interest Rate – Mortgage one interest rate is the interest you still have left at the time of closing your house. This is added to the outstanding balance that you still have to pay off if you haven’t already.
Mortgage Two Balance – This is the remaining balance you still have left if you have taken a second mortgage and still haven’t paid it all off yet. If you didn’t apply for one, leave it blank.
Prepayment Penalty – This is the penalty you have to pay if you paid off your mortgage early. However, not all mortgages have this.
For a lot of homeowners, especially those who have compromised a lot for the sale price of their house, selling their house is not worth much of the hassle and the net proceeds they’ll get. After you have estimated your net proceeds, assess if the balances and interest of your mortgages and other additional expenses after the house sale can be paid with the net proceeds. It is crucial to calculate more carefully and see if the house sale is worth it.