Selling Before the Mortgage Amortization Term is Complete

Selling-Before-the-Mortgage-Amortization-Term-is-Complete

Many people opt to sell their homes before their mortgage amortization term is complete. All you need to do is pay back the lender the amount you owe them at closing. But sometimes the situation isn’t as clear-cut as you hope. But don’t worry – there may be other options available to you depending on your financial state.  Here we look at what you should consider before purchasing a new home with an outstanding mortgage, and the opportunities that may be open to you.

Determine Your Situation

Before selling your home, you should first figure out what your current loan position is – what’s left owing and the sale price that is needed to cover the loan balance. Talk to your mortgage lender or mortgage broker about obtaining a payoff quote.

Pay Off Your Loan

Your goal will be to sell your home to obtain enough money to pay off your loan balance and cover any closing costs. In an ideal setting, you’ll be able to close on your home for a higher price than your loan and obtain the remainder of the money.

Short Sale Option

Sometimes when the market has softened, your mortgage will be worth more than your home’s value. If this is the case and you still need to sell your home, you can talk to a bank about arranging a short sale. In a short sale, your lender may agree to a reduced payoff amount in order for you to complete the sale and for them to obtain the money that is owed.

Assumed Mortgage

You may also be eligible for the buyer to take over your existing mortgage, called an assumed mortgage. It will of course, depend on your loan rate, as buyers will only want to assume your mortgage if it’s to their advantage – the rate is lower than what they can obtain or has a better amortization period.

Moving Before You Sell

If you need to move before you sell your home, you may have to take on another mortgage until you can close the sale. This comes with risk to the lender so your eligibility will depend on your current credit rating, total income, and your ability to handle the new debt-to-income ratio.

Your mortgage isn’t designed to trap you in your home for good. It’s common for people to sell their homes before their mortgage has been paid in full. If you’re thinking about moving, talk to your Toronto mortgage broker at VERICO The Financial Forum about the potential options available for your loan situation.

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