Is it possible to sell your house and transfer your mortgage?

Do you own a house and want to sell it to buy a new one? If your mortgage is coming to an end, it’s simple. But if there are 2-3 years left, what can you do other than cancel it for a prepayment fee? One of the options available before the end of the term is mortgage transfer. Do you know this solution? Depending on your situation, this might be possible.

What is mortgage transfer?

When you sell your house to buy another, it is possible to transfer your current mortgage before its term, with its rate and conditions, to your new property. This option is only possible if the sale of your old house and the purchase of the new one take place at the same time.

We often confuse the transfer of a mortgage, from the old house to the new one, with two other actions: subrogation, which is a transfer of your mortgage balance from one financial institution to another, and assumption, which is the transfer of your mortgage to the buyer.

How does transferring a mortgage loan in Canada work?

If you decide to sell your property before the end of your term, you can request a mortgage transfer. Please note that not all banking institutions and mortgage contracts allow this. If this is not possible, you will have to pay a penalty for contract termination and early repayment, and choose a new mortgage with new terms and conditions for your future home.

Are all loans transferable?

Unfortunately, for most variable rate terms, mortgage transfer is not possible. If your mortgage is fixed rate, you may be eligible. The best way to ensure this is to contact your banking institution.

How does the transfer work when purchasing a more expensive property?

Here is a scenario: You are in your 3rd year of a 5-year term. Your interest rate is 2.75% and your current mortgage is $450,000. You buy your new property at a higher price, i.e. an amount of $650,000 at a rate of 6.25%. You will therefore need additional financing of $200,000.

Mortgage with blended interest rate: Your banking institution could grant you a blended interest rate that would be between the rate of your current mortgage and today's rate. Your term would also be postponed to 5 years. This is the first option.
Hybrid mortgage loan: The second possibility is the hybrid mortgage loan. You would have two installments on your new property: the first at the initial rate of 2.75% for the 2 years remaining at the term, and a second to be negotiated with your lender according to the term and the desired conditions as well as the interest rate. in force.

Why do a mortgage transfer?

There are many reasons for wanting to transfer your mortgage: your rate and conditions suit you and you want to keep them, you don't want to pay a prepayment penalty, you don't want to shop around or change your mortgage. banking institution, etc.

Source : https://www.centris.ca/