What Happens to Your Mortgage When You Sell Your Home Before Paying It Off in Canada?
Selling a home before paying off the mortgage is a common situation many homeowners face, whether for upgrading, downsizing, or relocating. But what happens to your mortgage in Canada if you decide to sell your home before it's fully paid off? This post will break down the key steps and potential costs involved in selling a house with an outstanding mortgage.
1. Paying Off the Mortgage with Sale Proceeds:
Explain how the money from the sale of your home will first go toward settling the mortgage balance.
The lender’s priority in receiving their share before you get any proceeds from the sale.
2. Early Repayment Penalties You Should Be Aware Of:
Clarify what early repayment penalties are (IRD vs. Three Months' Interest).
How these penalties can affect your bottom line and why they exist.
3. What Happens If You Sell for Less Than What You Owe?
Discuss the scenario of negative equity (owing more than the sale price).
Options for handling this situation, such as paying the difference or negotiating with the lender.
4. Porting Your Mortgage to Your Next Home:
Explain the concept of porting a mortgage and how it can help you avoid penalties if you're purchasing another property.
Highlight conditions under which this might be a good choice.
5. Closing Costs to Keep in Mind:
Briefly outline the common closing costs involved when selling a home, such as realtor fees and legal costs, and how they can impact your mortgage payoff.
