Questions about mortgages when selling a home - Calgarypuck Forums - The Unofficial Calgary Flames Fan Community

Teh_Bandwagoner · 10-03-2007, 04:10 PM

Hello all,

So here's my situation: I currently own a home that I bought late last year, that has since appreciated in value by about $50k. I currently have a fixed-rate mortgage that's locked in for 5 years. However, I'm contemplating the idea of moving to the US next year. I haven't decided for sure yet, and it will likely be dependent on the value of my home next year and the property value of homes in the US next year.

In any case, I've never sold a home before, let alone selling one to maybe pick up a place in another country. I have a few questions regarding this:

First, since I'm still supposed to be locked in for 5 years, is there a penalty for selling my home prior to the 5 years? Specifically, my rate was locked in prior to the 5-point rate increase in the summer.

Secondly, what happens to the increase in value on my home when I change mortgages? Can that be cashed out in any way, or must it be transferred to my next mortgage? If so, what kind of terms do I have for that money in the transferrence. And what sort of consequences are there for transferring it to a foreign mortgage?

Thirdly, if I were to sell my place in summer and pick up another place in the winter (either here or in the US), what would happen to the mortgage between sell and purchase time?

Sorry for all the questions, but I absolutely have no knowledge about selling homes, and teh internets has come up with no answers for me so far. Any info would be greatly appreciated!

TheyCallMeBruce · 10-03-2007, 04:17 PM

What the...this is how I find out you're gonna move to the states? Through CP? lol

corporatejay · 10-03-2007, 04:17 PM

It would depend on your bank but let me give you a general idea.

Generally if you terminate your mortgage before the term you end up paying penalties which is the interest you would have paid to the bank over the 5 years. so if you sell it after 3 years, and you have 2 years left, you pay 2 years worth of interest as a penalty.

most banks however, will let you "roll your mortgage over" if you choose them again for a home. So if your mortgage is with RBC and then you buy another house and use RBC again, they probably won't charge you penalties (at least they shouldn't).

the money you gain from your house is yours to do with what you wish. Most people put it into the next home, and many banks suggest this approach, however if you choose to pocket that money it's entirely up to you.

If there is that six month gap, that extra money should just sit in a bank account. I recommend a high interest savings account through RBC or ING. They give you a return of about 3.75%, it's safe, and you can access your money at any time.

hope this helps.

Sylvanfan · 10-03-2007, 04:31 PM

Most mortgages have an early payout penalty of 3 months interest, but it does depend on the mortgage. If you have a penalty of 2 years interest....yikes you don't want to do that.

If you are selling and buying another place the bank will usually port the mortgage for you and that usually doesn't cost you any interest. At that point in time you can keep the old mortgage amount and your lawyer will reimburse you the difference between the sale price minus all liabilities and whats left type of thing. As far as buying a place in the U.S. I don't know for sure if Canadian banks will lend you money if you move to the U.S. The rules between the two countries are pretty different and the interest rates also vary. Right now you might be better off to pay out your 3 months interest if thats what it is, and get a U.S. based lender to loan you the money. Also in the U.S. you can write off the interest portion on your mortgage against your income.

I think you'd want to sell your place here while you're still in Canada and wait for the end of the year and it should be yours. Than move down to the U.S and buy a place there if you want and take advantage of the tax laws there.

Teh_Bandwagoner · 10-03-2007, 04:43 PM

Ah I'm just contemplating it for the time being. With Canadian $ being so high and US housing prices dropping like mad, this may be my only chance to be able to afford to live in the San Francisco area lol! But who knows how that will look next year. In any case, even if I don't, I'd still like to upgrade from the townhome come next wintertime. So one way or another, I'm probably selling my place next summer.

Anyway I never did look at the early exit terms PC had when I first purchased this place. I s'pose I should look into that. I wasn't planning on moving anytime soon, but on the other hand I didn't think the CAD$ would ever be this good, or that I'd like San Jose as much as I did heh.

TheyCallMeBruce · 10-03-2007, 04:45 PM

Quote:

Originally Posted by Teh_Bandwagoner

Ah I'm just contemplating it for the time being. With Canadian $ being so high and US housing prices dropping like mad, this may be my only chance to be able to afford to live in the San Francisco area lol! But who knows how that will look next year. In any case, even if I don't, I'd still like to upgrade from the townhome come next wintertime. So one way or another, I'm probably selling my place next summer.

Anyway I never did look at the early exit terms PC had when I first purchased this place. I s'pose I should look into that. I wasn't planning on moving anytime soon, but on the other hand I didn't think the CAD$ would ever be this good, or that I'd like San Jose as much as I did heh.

Ah I see.

Off topic: What time are we meeting tonight? 6 or 6:30? lol. I figured you'd be reading this so I'd ask.

Teh_Bandwagoner · 10-03-2007, 04:47 PM

I'll fire an e-mail off.

automaton 3 · 10-03-2007, 05:28 PM

A fixed interest rate is independent of whether your mortgage is of the open or closed variety.

Open mortgages can be paid out without penalties (or sometimes called "bonus" - not a bonus to you though!)

Closed mortgages typically have a pre-payment penalty of 3 months interest, but it does vary. Read through your lawyer's reporting package to determine what type of mortgage you have.

Any amounts left over after paying out your mortgage (and any other financial encumbrances on title) plus any other other closing costs (generally realtor's and lawyer's fees) belongs to you.

I very much doubt your mortgage can be ported into the US, but check with your financial institution.

Teh_Bandwagoner · 10-03-2007, 06:00 PM

Quote:

Originally Posted by automaton 3

A fixed interest rate is independent of whether your mortgage is of the open or closed variety.

Open mortgages can be paid out without penalties (or sometimes called "bonus" - not a bonus to you though!)

Closed mortgages typically have a pre-payment penalty of 3 months interest, but it does vary. Read through your lawyer's reporting package to determine what type of mortgage you have.

Any amounts left over after paying out your mortgage (and any other financial encumbrances on title) plus any other other closing costs (generally realtor's and lawyer's fees) belongs to you.

I very much doubt your mortgage can be ported into the US, but check with your financial institution.

How much do the fees generally cost? Is it a percentage of the sale price or a fixed amount? Or is that dependent on who you deal with?

And actually I would be kind of hesitant to place the excess money into a house in the US unless a down payment was required of me. With the potential recession on the horizon, I feel like any down payment I make would be money lost. I think with the volatile housing market, I'd would almost prefer just to wait for some stability in the market before putting that money in. Does that make any sort of sense? Or is it better just to make the down payment either way?

V · 10-03-2007, 06:53 PM

I've been looking into buying a house in the States, and it doesn't look like many banks in Canada will give you a mortgage for an American house. Which means you'll have to use an American lender, and I've heard nothing but trouble from them lately, with them pulling out of deals days before you're supposed to take the house. Just third hand knowledge, but from what I hear, buying a house in the States can be a hassle, especially if you aren't putting much of a downpayment on the place.

Teh_Bandwagoner · 10-04-2007, 12:08 AM

Do you know of any banks that will give you a mortgage on an American home then?

And yah I hear it's difficult for even American's to get a mortgage right now. But you'd think they'd be more open to Canadians, seeing as we are less affected by the foreclosure issues down there and in fact some of us benefit from their falling dollar. Seems like during times like these, they would be more welcome to foreign investors?

V · 10-04-2007, 12:24 AM

Try Scotia. I've heard rumours that they just might do it, but I haven't looked into yet myself.

As for whether or not banks would be adverse to lending to you, you aren't talking about putting much of a downpayment on the place, so if you're in a position where you need mortgage insurance I think you're a high risk no matter which way you look at it. Sparkling credit or not.