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Sandra McCarty

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What’s the difference between a Short Sale and a Short Payoff?

Posted On: February 26th, 2020 11:58AM

Short sales generally work if you are facing foreclosure or can't pay your mortgage. Short payoffs work best if you aren't having trouble with your mortgage payment. 

Short sales and short payoffs are very similar in that both transactions involve the lender allowing your home to be sold for less than the total debt you owe. One of the main differences is that a short payoff allows borrowers to rid themselves of the home with little damage to their credit score while a short sale will negatively impact the borrower’s credit score.   

There are also significant differences in the criteria to become eligible.

Criteria for a Short Sale

Generally, to be eligible for a short sale:

  • the market value of the home must have dropped significantly
  • the homeowner must be in default (late on payments) or is likely to go into default soon
  • the homeowner has no assets that could be used to satisfy the debt, and
  • the homeowner must have experienced a financial hardship.

Criteria for a Short Payoff

Generally, to be eligible for a short payoff:

  • the borrower must demonstrate the ability to pay off the debt
  • the lender will sometimes require that the borrower be current on mortgage payments, and
  • the borrower must have a steady income and good credit.

A short payoff can be a good option when:

  • the market value of the home has dropped significantly
  • the homeowner can afford to make mortgage payments
  • the homeowner wants to move away from the property, and
  • the homeowner does not have the ability to pay a large amount of money to cover the deficiency between the sales price and the total debt.

Should I Do a Short Sale or a Short Payoff?

Ultimately, if you are behind in your mortgage payments (or soon will be) and are suffering from a financial hardship, then a short sale is probably the best route to pursue. However, if you are current on your mortgage payments, have financial resources, and simply want to move away from an underwater home, then a short payoff might be the right choice for you.

If you have questions, concerns about your mortgage, want to do a short payoff or short sale call us today at 516-300-2427. Our team of experts will be happy to help you.

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