What Happens to Current Mortgage when Selling a House in Toronto
10 July, 2012 / by Bryan Jaskolka
Selling your home is such an exciting time! You’re about to embark on a new journey in your life and there are a lot of fun changes ahead. But first, you’ll have to figure out what to do with your existing mortgage. So, what happens to your mortgage in Toronto when you sell your home? You’ll have three different options.
The first option you have is to pay off your mortgage entirely. This can be a good option for those that have an open mortgage, meaning that there won’t be any prepayment penalties should you pay out your mortgage. Paying off your mortgage in full is also only a good option if the remaining balance on the existing mortgage is small, and you’re not planning on purchasing another property.
The second option you have is to port your mortgage, meaning to transfer it to another property that you are buying. With this option, you can simply leave your mortgage the way it is or, if you need to increase the amount on the existing mortgage, you can also speak to a mortgage professional about home refinancing. This can give you additional money if the home you’re moving to is greater in value than the one you’re leaving. However, if the current interest rate at the time of your refinance is greater than the interest rate you’re currently paying on the mortgage, this may not be the best option. While you may not have to pay that higher rate, it will be blended with your current rate, which will ultimately still leave you with a higher rate.
The third option you have when selling your home with an existing mortgage is to allow the buyer to assume the mortgage. This is something that fell out of practice for several years in Toronto; but with today’s extremely low interest rates, they’re making a comeback. In fact, when you allow a buyer to assume your current mortgage and that mortgage is a very attractive package, it can actually be a selling point for the home. This can also be beneficial to you, the seller, because it will allow you to get out of your current contract without actually breaking your mortgage and having to pay prepayment fees.
You have lots of options when you’re selling your home in Toronto and it has an existing mortgage. In order to figure out which one is best for you, you need to speak to determine what would be best for your own situation, and then speak to a mortgage professional who can help you with whatever home financing option you need.