Penalties when cancelling mortgage

[shane_c]

If we were to sell our house before our mortgage term expired what sort of penalties can we expect? Is it just the interest we would have paid back for the remaining term? If we decided to sell as an assumable mortgage could we get away from these penalties? With an assumable mortgage do we specify we would like X amount of dollars and then you can assume our mortgage?

[Ironhorse]

Originally Posted by shane_c

If we were to sell our house before our mortgage term expired what sort of penalties can we expect? Is it just the interest we would have paid back for the remaining term? If we decided to sell as an assumable mortgage could we get away from these penalties? With an assumable mortgage do we specify we would like X amount of dollars and then you can assume our mortgage?

You have to pay the extra interest. We switched houses (and redid the mortgage) recently, and IIRC we had to pay about $900 or so to pay out the current mortgage.

[habernac]

if your bank wants to keep you as a customer, they won't penalize you at all.

[redforever]

This is not something you should be asking for answers here. There are many variables, depending on the institution you deal with. Talk to the people who know the answers, the institution your present mortgage is with.

[V]

I assume you'll be buying a different house? When I moved last time, it was halfway through a 5 year term, and the house I was moving to was more expensive than my first place, so I just basically merged my current mortgage with a mortgage for the outstanding balance of the new house. There were no penalties involved.

[Log]

Originally Posted by habernac

if your bank wants to keep you as a customer, they won't penalize you at all.

Agreed... I know that at my bank (BMO), there is no penalty if I end up buying a house that requires me to borrow more.

[tvp2003]

If you're cancelling the mortgage outright (without buying another home and having a 'new' mortgage), I believe the penalty is something like 3-months interest, but I would check with your lender to be sure...

[ken0042]

Originally Posted by shane_c

With an assumable mortgage do we specify we would like X amount of dollars and then you can assume our mortgage?

When I bought my house I assumed the mortgage. The seller listed it for the regular price, and then listed how much would be required to assume the mortgage. Then when I negotiated him down the cash to assume went down as well.

Didn't you just buy your place? Is the paint on the walls even dry yet?

[shane_c]

Thanks! Called the lender and waited on hold for a while and was told if we bought another place we could apply to have the mortgage transferred and would pay a penalty on the difference if it was less. If we were to move out of province though wouldn't you have to have your 6 months probation in at the new job first before you could be approved again? How can you do that though if you move one province to another and would like to be able to move into a house when you get there?

[shane_c]

Originally Posted by ken0042

When I bought my house I assumed the mortgage. The seller listed it for the regular price, and then listed how much would be required to assume the mortgage. Then when I negotiated him down the cash to assume went down as well.

Didn't you just buy your place? Is the paint on the walls even dry yet?

Thanks Ken.
Yes we just bought but have been wanting more in life than a mortgage sucking up all our income. When our landlord decided to sell the place we weren't left with much choice but to buy since there are very few rentals out there. We plan to stay for a bit and are doing some painting, hardwood, tile, etc to increase the value but will leave at some point assuming the prices go up in the next 6-12 months and we'd be able to make a nice profit.

[Buff]

With my mortgage I am unable to pay off the entire thing without a penalty for the first 5 years of the mortgage. After next year (the 5th) I'm home free and can pay off the rest of my mortgage.... well If I could afford to do so.

[Sylvanfan]

The last time I moved I got my new employer to write a letter to my bank stating that I wasn't on a probation period. I told him I wouldn't take the job if he wouldn't do that because without I couldn't find a place to live. That way I could get approved for a different mortgage. Most employers should be able to lie to the bank for you, or just not mention that you are on probation.

I also stayed with the same bank and was able to avoid paying out an interest penalty. Even if you want to switch your mortgage to another bank, you should be able to get them to eat your interest payout penalty. 60% of your payment goes to interest on one of those things so for them to eat like $1200-1500 is something they'll get back out of you in 3 months. Most people don't have the time and audacity to switch lenders every 3 months for their mortgage.

[troutman]

The usual penalty is 3 months interest; often this is waived if you continue to do business with that bank.