mortgage help

[ashs]

i was wondering if someone can help me. me and my wife recently bought a house and the closing date is dec 14th. Our current house was sold but the people who bought it backed out because they could not get a mortgage. My question is this, because we will not be able to sell our house before the closing date, is it possible to get a new mortgage on the house we bought and cancel that(without penalty) when we sell our current house, then transfer our current mortgage over (so we can keep our current rate).

Our broker suggest that we get a new mortgage for the new house and then just pay off our current houses mortgage when we sell it, but the reason i don't want to do that is because a) the rate for the new mortgage is higher, and b) because we did not fulfill the term on our existing mortgage we will probably be taxed 3 months interest on the house for ending it early.

Any help is appreciated.

btw bridge financing doesnt work because our current house has not been sold yet.

[Hubster]

This should probably be in Personal Finance, but ...

If I read you right - I imagine you would require a Fully Open Mortgage. Whereby the lender will let you out of the contract with minimal financial penalty. Key words are Fully Open. The problem may be in finding one that will allow you out after a potential, very short time frame. That's your brokers job! If he isn't offering options, I suggest you find a new one.

The issue with getting a mortgage for the new house may be you qualifying to carry both mortgages at the same time? Which is what you will be doing until the current home sells.

You can then port your existing mortgage (and rate) to your new home and cancel the new, open mortgage.

[Neil]

Certainly, depending on your credit worthiness and other factors.

You may want to look into an 'open' mortage which means it is open for repayment.

Then when you sell your other house in January or whenever you can make a decision about what to do with the 2 existing mortgages.

Something you should realize though is that the rate on your old mortage will probably not just slide over to the new one and be the same if the amounts are different.

If for example your old mortgage is allowing you to borrow $100,000 at 4% and the new house will require you add $200,000 to it, the lender will probably want to blend the rate. This means $100,000 would be at the old rate, and $200,000 would be at the new rate (say 6%)

Simple math works out that your new 'blended' rate as 5.3%

If you do all the borrowing for both mortgages from one supplier they might be more flexible. Or perhaps whichever company will be ending up with the final long term loan might be willing to absorb or subsidize the fees and penalties.

[Neil]

Another point... if you are closing in just 2 weeks you probably want to jump on this pretty quickly if you didn't know that already! 2 weeks can fly by like nothing when it comes to mortgages, appraisals, approvals etc

[Colleeseum]

Check with your mortgage broker about a 3 yr open variable mortgage at BMO. My broker was able to give me prime-0.6 = 5.75 for it. You can pay it off anytime without any penalty.

[ashs]

thanx for the replies guys, yea im definately gonna looking into getting open mortgage (regardless of what my broker says). The good thing with our new house is that we are paying 409k for it and our current house we bought for 408 (so its relatively close so we should be able to transfer it over). Now to find a place to get a open mortgage (we have about 80-90k) which is around 20% of the value of the house. what sux is that maple trust (the company we have our existing mortgage with) does not offer open mortgages (what our broker says) but Scotia does and they just recently bought maple trust (might look into that) or BMO like the user suggested.