- who: Homeowner
- real estate goals: Mortgage renewal
- issues: Finding a competitive rate
The proceeds from the sale will be used to pay off your mortgage including closing costs and other fees, and you will no longer be responsible for making monthly mortgage payments. If there’s any money left over from the sale, you are free to keep it.
The proceeds from the sale will be used to pay off your mortgage including closing costs and other fees, and you will no longer be responsible for making monthly mortgage payments. If there’s any money left over from the sale, you are free to keep it.
Whether you’re buying your next property or selling to invest, Perch has the insights you need to make the right decision.
We’ll connect you with a local, recommended realtor to streamline the process of selling or buying your next property.
We’ll connect you with a recommended realtor to streamline the process of selling or buying your next property.
5-year variable
5-year fixed
When you sell your home with an existing mortgage, the mortgage is generally paid off (via proceeds of the sale given to the lawyer) along with any other liens attached to the house such as a home equity line of credit or a second mortgage, water heater lien, solar panel liens, etc. If you are moving to upsize or downsize your home, you can ask your mortgage advisor if porting your mortgage is an option.
If you have an existing mortgage, you may need to pay a penalty fee when selling your property. These fees can be the equivalent of 3 months of interest or the Interest Rate Differential (IRD), which is the difference between the principal amount you owe at the time of the prepayment and the principal amount you would owe using a similar mortgage rate. The similar mortgage rate is the posted interest rate for a similar mortgage. Prepayment fees can cost thousands of dollars depending on how much time is left on your term.
Open mortgages allow early payment without penalties, while closed mortgages require penalty fees for ending the mortgage early. To determine your mortgage type, review your contract or consult your mortgage advisor. Closed mortgages are more common and usually have lower interest rates. Therefore, if you sell your house before fully paying off a closed mortgage, you will likely incur mortgage penalty fees.
If your home has appreciated in value and you sell it for more than what you initially paid, you will make a profit. The proceeds from the sale should cover the remaining mortgage balance as well as any penalty fees. Once the mortgage is fully paid off, the remaining balance will be yours.
Taxes on the profit from selling your house depend on whether it was your primary residence or a rental property. Primary residences are usually exempt from taxes, while rental properties may require payment of the capital gains tax.
If you sell your home at a loss, there are two possible scenarios. In one scenario, the proceeds from the sale are enough to cover your remaining mortgage balance. The other scenario, known as a short sale, occurs when the selling price is lower than the mortgage balance. In this case, you’ll need to work with your mortgage lender and may require their approval for the sale. To pay off the remaining mortgage, you might have to provide additional funds beyond the sale proceeds. Additionally, there may be mortgage penalty fees for ending the mortgage early.
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