2. Due on Sale clause. Most mortgages contain what is known as a "due on sale" clause. This means that upon the sale of your property to a third party, your existing lender can call the entire unpaid balance of the mortgage due. While lenders do not often assert these clauses, the possibility remains. This is too great a risk, and I cannot recommend you enter into such a sale without first obtaining your lender's approval of the transaction.
3. Additional encumbrances. Even if you own your home free and clear, there is nothing to stop your buyer from taking out a new mortgage on "your" home after settlement. If that new lender does not receive the monthly payments on time, it can foreclose. This can cause you a lot of aggravation, as well as uncertainly and legal fees.
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