Sara Routhier, Managing Editor and Outreach Director, has professional experience as an educator, SEO specialist, and content marketer. She has over five years of experience in the insurance industry. As a researcher, data nerd, writer, and editor she strives to curate educational, enlightening articles that provide you with the must-know facts and best-kept secrets within the overwhelming world o...

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Joel Ohman is the CEO of a private equity-backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He also has an MBA from the University of South Florida. ...

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Reviewed by Joel Ohman
Founder, CFP®

UPDATED: Dec 28, 2011

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Borrowers who want to sell their home or are currently in negotiations with a buyer to purchase their home should definitely continue to make payments on their home loan.


Given today’s mortgage loan atmosphere, many borrowers have little to no equity in their homes, and foreclosures and short sales are running rampant. In the event borrowers find themselves as one of the fortunate few whose bank is allowing a short sale, they may find themselves tempted to cease making payments when they know they won’t own their home for long. However, it should continue making payments on their home loans until the transaction is complete.


Home titles need to be delivered completely clean. This means a property’s taxes have been paid, no existing liens against the house exist, and all payments have been paid to the lender holding title. If this doesn’t occur, the buyer may decide to let the transaction fail in escrow and walk away from the deal. In the event this happens, the home owner will be stuck with their house, be behind on payments, and likely lose eligibility to participate in a short sale. If this happens, the owner may have to resort to foreclosure.


Additionally, sellers will see their credit score drop if they decide to stop making payments on their mortgage loan. Some sellers may say they don’t care about their credit score, or believe they will have time to correct any dent before making a big purchase, but this is a very risky move. Particularly for those who would like to purchase a new house upon selling their current one.


The damaging effect skipping payments can have on a credit score may result in the homeowner receiving a higher interest rate on their next home loan. Higher interest rates, even of a few tenths of a percent, can result in a difference of thousands of dollars over a loan’s lifetime.


Escrow has enough bumps and obstacles to avoid without the extra weight of a seller deciding it would be more convenient to begin defaulting on their payments. When all is said and done, the money put into the property’s final payments will be worth securing the deal and will likely be far less than the amount a future home loan will cost as a result of a wounded credit score.