Should I Sell or Keep My Paid-Off House?

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So you’ve paid off your entire mortgage. Congratulations! You might be wondering whether now is the right time to sell your house, or to keep it longer.

Depending on your situation and current needs, either could be the right choice for you. Maybe you want to downsize and save for retirement. Or maybe you’re considering keeping the house as an investment property. Each option has its pros and cons.

To help decipher them, Mikki Ramey, a top real estate agent in South Carolina, and Richard Helali, a mortgage lending expert with HomeLight Loans, gave us some pointers.

“When it comes to this, it’s not that one choice is good or bad, but it’s really what that individual person is most interested in and most comfortable with,” Helali comments.

A house that has been paid off.
Source: (Murali / Unsplash)

How do you decide whether to sell or keep a paid-off house?

There are plenty of reasons why you might want to sell your paid-off home. The number one reason, and the most obvious, is that you want to move.

Reasons to sell

  • Desire to move to a newer, nicer home
  • Need to relocate for work
  • Move to be closer to family (or farther away)
  • To have a smaller space after children move out
  • Need more space for multigenerational living arrangement
  • Want a less expensive property
  • Want profits for retirement, vacation, or emergencies

Ramey says she recently helped a couple sell a house for $900,000 and bought a house for $500,000 in a 55+ community. They’re using the $400,000 in profits to support them in their retirement.

“Because another thing that people always forget about retirement, eventually, is your living expenses are pretty much relatively the same,” Helali explains. “In some cases, people end up spending more in retirement.”

Or perhaps the opposite is true, and you’re starting a family and need more rooms and spaces. Ramey recalls clients she worked with who owned a condo, but were starting a family and adopted two dogs, so they needed to buy a bigger house.

“The condo was paid off, so one benefit of that is you can go ahead and buy your next property and you don’t have to have a home sale contingency, which is very important in this market,” Ramey explains.

A home sale contingency is a clause added to a purchase agreement that makes the sale reliant on you selling your previous home before you can close on the next home. Most homeowners who are simultaneously buying and selling a home are stuck in a conundrum: They typically can’t afford to carry two mortgages at once, so they need to settle their previous home’s sale — and pay off the mortgage — before they can close on the new home and get funded for a new home loan.

In the case you sell a paid-off home, you won’t have to settle one mortgage before applying for a new one, so it gives you a leg up as a buyer.

Additionally, selling a home for profit can help sellers pay off debt they might have, whether it’s from another house, credit cards, medical bills, or student loans. Whatever the motivation may be, sellers usually have a good reason for selling their paid-off home, and have an idea what they’re going to do with the profit from the sale.

“The benefits of selling a paid-off home are usually that you have a plan B. Most people selling homes know what their next step is,” Ramey explains. “But when the mortgage is paid off, people are gonna use that money for something. Whether it’s to pay down extra debt, whether it’s to take vacations, whether it’s money that they’re saving for retirement.”

However, sometimes it’s best to keep the house after you’ve paid it off. For many people, it’s simply not the right time to move, or their current house is perfect for their current situation.

Reasons to keep

  • No mortgage payments
  • Cost of living significantly reduced
  • Will only pay property taxes, utilities, and home improvements
  • Able to keep home equity
  • Can choose to sell when the time is right

“Really, the biggest advantage is you’re not going to have a payment and your cost of living goes down quite a bit,” Helali notes. “And especially in high-cost areas, if somebody can get to that point where they virtually pay off a mortgage, it’s going to make everyday life just easier, because you don’t have that mortgage to pay that you have to worry about, which is the nice thing.”

There are also several reasons to buy a new house but keep your paid-off house. If you can afford to purchase another house but keep up with the taxes and utilities of the paid-off house, you have even more options.

Helali notes that buyers who have already paid off their mortgages will have an easier time qualifying for loans to purchase a second home because they no longer have that monthly expense.

”Because they do not have a mortgage, and their primary residence is totally paid off, it makes qualifying for that new home significantly easier,” Helali says.

I just keep properties because I like the fact that some day, I’m not going to work selling real estate. And I will live off the rental income from all of the properties that I own. That’s a big benefit of never selling. Ultimately you’re going to have rental income generated from investment properties you purchased that will help pay for your living expenses.
  • Mikki Ramey
    Mikki Ramey Real Estate Agent
    Mikki Ramey
    Mikki Ramey Real Estate Agent at Healthy Realty
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    Currently accepting new clients
    • Years of Experience 20
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Reasons to keep, and buy another

  • Keep it in case a family member needs it
  • Keep for a second home
  • Keep as a rental property to generate income

Ramey herself has investment properties and likes to keep the ones she’s paid off to continue generating rental income that she can put towards living expenses, or towards buying another investment property.

“I just keep properties because I like the fact that some day, I’m not going to work selling real estate. And I will live off the rental income from all of the properties that I own,” Ramey explains. “That’s a big benefit of never selling. Ultimately you’re going to have rental income generated from investment properties you purchased that will help pay for your living expenses.”

Major factors to consider

Now that we’ve identified some of the major reasons for selling or keeping a paid-off house, now let’s review the pros and cons that accompany them. Each home sale is different, however, and some pros and cons might not apply to your specific situation. Below are just a few advantages and disadvantages to consider.

Selling Advantages

  • Lump sum of money: Because you don’t have to pay off your mortgage, all the money from the home sale goes straight to you (minus selling expenses and closing costs, of course). Having a lump sum of money could mean lots of financial freedom and opportunity.
  • Tax advantages: If you’ve lived in the home at least two of the past five years, it’s likely you won’t have to pay capital gains tax on profits up to $250,000 for single-filers and $500,000 for joint-filers.
  • Freedom to buy another house, invest, travel: You can use the profits from your home sale to buy another house, pay off debt, invest, save for retirement, or travel.
  • Opens options to move: Selling your paid-off house for a profit gives you more leeway when it comes to purchasing a new house in your desired location and at your desired size.

Selling Disadvantages

  • May not get the best price in a down market: Depending on the type of market you’re in, you might not get the best price if you sell now, meaning you may not achieve the profits you expect. While this might not be as important to you as other factors, it’s worth checking in with an expert to get insights on where the market is headed.
  • No longer have the house as an asset, or if family members need it later: Owning a house outright is a huge financial asset which can help you in the future. Additionally, giving the house to family members or letting them live in it from time-to-time is very convenient.
  • Lose out on potential rental income: Selling your home means you no longer have the option to rent it out, which can generate almost-passive income, especially on a home with no mortgage.

Renting Advantages

  • Keep the house for future needs: Even if you rent the home for a while, you can later choose to let family members move in or sell it during a peak market for maximum profit.
  • Provides income stream: Renting units can often be a low-maintenance way to earn money.
  • With the rental property paid off, high profit cash flow: Receiving rent on a home that’s been paid-off already means you’ll pocket all of your rental income.
  • Landlord tax breaks: Landlords can write off many of the expenses associated with their rental properties on their annual tax returns.
  • Can sell later even with an existing tenant: If you decide the landlord life isn’t for you, you can usually sell the home with tenants living there, and their leases may transfer over to the new seller.

Renting Disadvantages

  • Being a landlord can be challenging: Dealing with tenants and property management issues is not for everyone.
  • Dealing with damage and legal issues caused by tenants: There’s a lot of potential legal liability that goes into being a landlord, so you’ll have to make sure your leases are airtight. If not, you might have to deal with damages and court dates.
  • Keeping up maintenance and repairs: No home is perfect, and you’ll be the one your tenants call with any home issues, unless you delegate to a property management team. These problems can arise on odd hours, any time of the year.
  • Second home costs: You’ll need to buy a second house to rent out your first — so even though you’ll be making rental income, you’ll still have another mortgage to pay.
A home that is building equity for its owners.
Source: (Alexander Wark / Unsplash)

What to expect if you do sell

Ramey says that the main difference between selling a paid-off home is the seller’s mindset, not necessarily the financial process itself. The main difference between selling a home with a mortgage and a home that’s been paid-off is not having to close one mortgage before opening another. Because your mortgage has already been paid-off, you don’t have to go through the extra steps of using the home sale to pay off your mortgage. This means you can avoid home sale contingencies when you buy your next home, which can drag the process on even longer. Plus, it’ll mean more money in your pocket from the sale.

Typically when a seller gets their closing statement, it will show how much money they are receiving from the sale, then subtracts the agent fees, seller’s costs, and the balance they owe on the mortgage.

“And after that, the bottom line is how much money you’re getting. If they own the place free and clear, they still have to subtract commissions and seller closing costs, but no balance, therefore, they get that money instead,” Helali comments.

The seller will still be responsible for all of the normal fees associated with a home sale, like agent’s commissions, property taxes, attorney fees, and taxes or fees on transferring the home’s deed. So don’t expect many savings on that front just because your mortgage has been paid off.

Real estate agents and experts like loan officers can help sellers throughout the entire selling and buying process. Additionally, they can help you decide whether selling your paid-off home is the best option for you right now.

“The longer I’ve been in real estate, the more I consider myself a real estate advisor to people, and sometimes it’s just not the right time to sell,” Ramey comments. “Like if they have their home paid off and it’s big enough for their family and they’re in the right place, it might not be the right time to sell.”


Ultimately, the choice to sell or keep a paid-off house is deeply personal. For some, keeping the house and enjoying a lower cost of living is the goal. Others might want to keep the house but buy another, and use the paid-off house as a source of rental income. Still, there are lots of advantages to selling your paid-off home, especially if you need a lump sum of money or need to move.

Be sure to talk with an experienced real estate agent if you are still having trouble making your decision. Get matched with a top-rated agent in your area with HomeLight’s Agent Match.

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Header Image Source: (Murali / Unsplash)