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2026-09-25

Selling a home with a mortgage still on it ― can you pay it off on settlement day, and three routes when the money falls short

You can sell a home that still has a mortgage on it. But the premise is that on settlement day the buyer's money repays the loan and the mortgage can be cancelled. Does the sale price, minus the brokerage fee, stamp duty and cancellation costs, reach the remaining balance? If not, there is your own money, a bridging \"move-up\" loan, or a voluntary sale. Using the real figures of a man who sold his condominium because of a job transfer, this article shows how to work out \"the price below which you cannot sell.\"

About this translation ― This page is an English translation of an article originally written in Japanese by KuraLab's operator, a licensed real-estate transaction specialist (宅地建物取引士) and administrative scrivener (行政書士) in Japan. The Japanese original is the authoritative text; where the two differ, the Japanese version prevails. The article explains Japanese law and procedure in general terms as of the date shown. It is not legal, tax or immigration advice for your situation ― please confirm with a licensed professional in Japan. Japanese terms are kept in parentheses so you can search for them. Read the Japanese original

"I still have over 20,000,000 yen left on the loan. Can I sell anyway?" The man in his forties, who had just been told of a job transfer, put the repayment schedule from his bank on the desk and said that. It was a condominium he had bought eight years earlier; the two companies he had asked for valuations said 24,000,000 yen and 23,000,000 yen. The balance on the schedule was 22,500,000 yen. I took out a calculator and said, "Before whether you can sell, let's work out what price you need so that you don't end up with less than zero."

A home with a loan still on it has the bank's mortgage (抵当権) registered on it. No buyer will buy a home with the mortgage still attached, so when you sell, on the handover day (settlement day) the money the buyer pays repays the loan in full, and the mortgage is cancelled the same day. If the sale price exceeds the remaining loan plus the costs of selling, you can sell without putting in your own money. If it falls short, you cannot cancel the mortgage unless you find the difference, and you cannot sell. The only thing to think about is this subtraction.

The flow on settlement day is fixed. First, two weeks to a month before settlement, you apply to the bank that lent you the money for full early repayment. The time required differs by bank, so ask by phone before putting the home on the market. On the day of settlement, the buyer, the seller, the judicial scrivener and the estate agent meet, for example in a room at the buyer's bank. The buyer's home loan is drawn down, the money goes into the seller's account, and it is paid straight to the seller's bank as repayment. The judicial scrivener, having received the mortgage cancellation documents from the bank, applies to the Legal Affairs Bureau the same day for the transfer of ownership and the cancellation of the mortgage, one after the other. The procedure for the cancellation registration itself is in the article on mortgage cancellation.

What happens on settlement day: the money becomes the loan repayment as it is, and the mortgage is cancelled the same day. The buyer's money goes into the seller's account and from there is repaid in full to the seller's bank, bringing the loan balance to 0 yen. The bank hands the cancellation documents to the judicial scrivener, who applies to the Legal Affairs Bureau the same day for the ownership transfer and the mortgage cancellation. Depending on the bank, the application for full repayment is needed two weeks to a month before settlement day. Check the period before putting the home on the market.

There are four main costs of selling. First, the brokerage fee to the estate agent, capped at 3% of the sale price + 60,000 yen plus consumption tax (where the price exceeds 4,000,000 yen). Second, the revenue stamp on the sale contract: for a contract over 10,000,000 yen and up to 50,000,000 yen, it is normally 20,000 yen, but for contracts made by 31 March 2027 it is reduced to 10,000 yen. Third, the registration and licence tax for cancelling the mortgage (1,000 yen per property) and the judicial scrivener's fee. Fourth, the early repayment fee some banks charge. On top of this there are moving costs, while on the other side, fixed asset tax and the management fee are often prorated to the handover day and received from the buyer.

So what do you do when it falls short? There are three routes. One is to pay the difference with your own money. Second, if you are buying a home to move into, a "move-up loan" (住み替えローン) that adds the rest of the old loan to the new one. The amount borrowed is larger than the price of the home, so the screening is stricter. Third is a "voluntary sale" (任意売却): when you can no longer keep up repayments, you sell for less than the balance with the consent of the bank or the guarantee company. The debt left after selling does not disappear, and you will be negotiating to repay it in instalments; in most cases there have been missed repayments along the way, so a record also remains in your credit information. Voluntary sales and debt restructuring are the territory of lawyers.

Applying this to the man's home. First he phoned the bank and confirmed the balance after the repayment in the planned settlement month, and the fee for full repayment. The balance was 22,500,000 yen and the fee 33,000 yen. The condominium was one building unit and two parcels of land, so the registration and licence tax for cancellation was 3,000 yen, and allowing 20,000 yen for the judicial scrivener's fee, cancellation would cost 23,000 yen. With this, we worked out how much he would have left at each of the two valuations.

If it sold for 24,000,000 yen: brokerage fee 858,000 yen, stamp 10,000 yen, cancellation 23,000 yen, early repayment fee 33,000 yen, for total costs of 924,000 yen. After repaying the loan, 576,000 yen would remain. At 23,000,000 yen, the brokerage fee would be 825,000 yen and the costs 891,000 yen, and after repaying the loan he would be 391,000 yen short. The valuations differed by 1,000,000 yen, but for the man it was the difference between "576,000 yen left over" and "391,000 yen to pay in."

What is left after repaying the 22,500,000 yen loan, at the two valuations and at the actual sale price (this article's example). Brokerage fee (3% + 60,000 yen, tax included): at 24,000,000 yen, 858,000 yen; at 23,000,000 yen, 825,000 yen; actual (23,500,000 yen), 841,500 yen. Stamp on the sale contract (after reduction): 10,000 yen in each case. Mortgage cancellation (registration and licence tax 3,000 yen + judicial scrivener): 23,000 yen in each case. Early repayment fee: 33,000 yen in each case. Total costs: 924,000 yen, 891,000 yen and 907,500 yen. What remains after repaying the loan: 576,000 yen; minus 391,000 yen (own money needed); and 92,500 yen.

From here we worked out "the price below which he would not sell": the balance of 22,500,000 yen plus costs of about 910,000 yen, 23,410,000 yen. Below this, he would have to add his own money. The man decided to list at 24,000,000 yen with a floor for price cuts of 23,500,000 yen, and told the estate agent. Rather than choosing the company with the highest valuation, deciding this floor first is, in my view, the most important preparation when selling a home with a loan still on it.

In the event, he listed at 24,000,000 yen for two months and had three viewings but no offers. In the third month he lowered it to 23,500,000 yen, an offer came within a week, and he signed the contract. The earnest money was 1,000,000 yen. I advised him to leave the earnest money untouched until settlement day. If the buyer withdraws by forfeiting the earnest money, that is the end of it, but if the seller cancels for their own reasons, they must return double. Settlement was a month after the contract; the total costs, including the brokerage fee of 841,500 yen, were 907,500 yen, and after repaying the loan he was left with 92,500 yen. On top of this came the prorated fixed asset tax and management fee received from the buyer.

There is also money that comes back after the loan is repaid. If you paid the guarantee company's guarantee fee in advance as a lump sum when you took out the loan, repaying early may bring back part of the fee for the remaining period. If you paid long-term fire insurance in one go together with the home loan, cancelling it also returns the amount for the remaining period. In the man's case, the guarantee fee refund was about 180,000 yen and the fire insurance cancellation refund about 40,000 yen, so what he had left came to over 300,000 yen in total. Neither comes back unless you apply yourself, so ask the bank and the insurer before settlement.

There are documents to get from the bank before putting the home on the market: a loan balance certificate (or the repayment schedule) and information on how to apply for full repayment. The balance falls a little with each monthly repayment, so calculate with the balance for the planned settlement month. If you also make bonus-month repayments, the balance changes a lot when you pass a bonus month, so check this especially. With loans such as Flat 35, where the point of contact is a different institution, the place to apply for full repayment may differ from the bank you borrowed from, and I have seen a case where that cost a week.

One more thing: if, when moving, you "buy the new home first," there will be a period when you pay two loans until the old home sells. If it does not sell and you keep cutting the price, you may end up going below the floor. The man's new posting came with company housing, so he had no such worry. Reading the article on how selling works and the brokerage contract, and the article on taxes when you sell, together with this one will give you everything to decide before putting a home on the market.

On settlement day, the man watched in the bank's meeting room as the envelope of cancellation documents was passed to the judicial scrivener. "I finally understand what 'you can sell even with a loan left' means." Whether you can sell is decided not by the valuation but by subtracting from it the balance plus the costs. Before you put your home on the market, write that figure on a single sheet of paper.

Written by: 長澤 湊（licensed real-estate transaction specialist, administrative scrivener, assistant surveyor）　Content checked on: 2026-10-24

This article is a general explanation of Japanese rules and procedures, not advice on an individual case. Figures and rules are as of the date shown. For your own situation, consult a lawyer, judicial scrivener, tax accountant or administrative scrivener in Japan.

Official sources

The rules and figures in this article can be checked against the following official pages (in Japanese).

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