Mortgage Penalty when selling condo?

[coolalex]

Hey everyone,

My bro bought a condo about 2 years ago and he got a fixed term mortgage (5 years). Now, he might relocate and never come back to Toronto. If he wants to sell his condo after 2 years, what kind of expenses/penalties does he have to pay regarding the mortgage? Obviously, in the first coupl of years most of the monthly mortgage pay goes towards the interest. So, do the mortgage companies usually impose a penalty or fee when someone wants to sell the condo?

Is there always a penalty or is it possible to transfer the mortgage to the buyer?

He is a bit cautious and wants to make sure after deducing mortgage costs, lawyer, agent, taxes etc, the remaining money is worth selling the condo rather than keeping it for long term.

[rf134a]

You'll need to read the contract. Different banks will require different penalties. RBC's penalty is 3 months interest if you're transferring to another RBC mortgage. It could also be blended with the new mortgage as well. Assumable mortgages usually come with a higher initial rate. And yes, there's always a penalty when paying out any mortgage that's not an open mortgage. The bank has to make money, too.

So, there's no easy answer. Read the contract.

[sillysimms]

The first mortgage I had with CIBC was a closed mortgage and it had a penalty of 3 months interest to pay if it was terminated early. Your contract will tell you what your penalty will be as rf134a advised.

Some mortgages allow them to be assumable by a purchaser, but again, you need to read your contract. My bank told me, at the time I got my first mortgage, it was assumable but the purchaser would have to qualify under their lending criteria. As well, the interest rate/terms of your mortgage would have to be better than the purchaser would be able to get on their own for them to consider assuming it (if it is allowed under the terms of your agreeement).

[need4speed]

Hey everyone,

My bro bought a condo about 2 years ago and he got a fixed term mortgage (5 years). Now, he might relocate and never come back to Toronto. If he wants to sell his condo after 2 years, what kind of expenses/penalties does he have to pay regarding the mortgage? Obviously, in the first coupl of years most of the monthly mortgage pay goes towards the interest. So, do the mortgage companies usually impose a penalty or fee when someone wants to sell the condo?

Is there always a penalty or is it possible to transfer the mortgage to the buyer?

He is a bit cautious and wants to make sure after deducing mortgage costs, lawyer, agent, taxes etc, the remaining money is worth selling the condo rather than keeping it for long term.

In addition to reading the Mortgage Documents
to see if the Mortgage is "Assumable" by the new purchaser...and what fees etc apply..
If your brother plans on buying a Home in his new Place of
residence...he should check the Mortgage Documents to see if it is "Portable"..i.e. if he can carry it to
his new Home...He should also check with his Lending Institution to see if it's doable...and what they offer..

[JAC]

He can probably walk away with no penalty if either a) he transfers the mortgage to the buyer, or b) gets a new mortgage with the same bank.

The bank will play ball if they want to keep his business.