Selling a Home with a Mortgage: What You Need to Know

Most homeowners sell before their mortgage is paid off. Understanding how to handle your existing mortgage during a sale is crucial.

Yes. Your mortgage is paid off from the sale proceeds at closing. Your lawyer/notary handles this automatically.

Step 1: Request a Payout Statement

• Contact your lender for a mortgage payout statement
• Includes: principal balance, interest, penalty, and discharge fees
• Valid for a specific date (usually 30 days)

Step 2: Closing Day

• Your lawyer obtains the payout figure
• Sale proceeds pay off the mortgage first
• Remaining funds go to you

Fixed-Rate Mortgages

• Interest Rate Differential (IRD): The greater of 3 months' interest or the IRD
• IRD can be substantial — especially if rates have dropped since you got your mortgage

Variable-Rate Mortgages

• Typically 3 months' interest
• No IRD penalty
• Generally lower penalties than fixed-rate

Open Mortgages

• No penalty for early payout
• Higher interest rates

What is Porting?

Moving your existing mortgage to a new property without breaking it. This avoids penalties and preserves your rate.

How It Works

1. Check if your mortgage is portable (most are)
2. Apply to port within 30-90 days of selling
3. New property must qualify for the mortgage
4. If the new home costs more, you blend rates on the additional amount

Porting Pros

• Avoid prepayment penalties
• Keep your current interest rate
• No need to re-qualify from scratch

Porting Cons

• Must close within the port window
• New property must meet lender criteria
• May not work if downsizing significantly

If your purchase closes before your sale, you need bridge financing:

• Short-term loan to cover the gap
• Your lender provides this if you have a firm sale agreement
• Costs $500-$1,500 typically
• Lasts 1-2 weeks

Ontario

• Discharge fee typically $300-$500
• Lawyer handles discharge registration

British Columbia

• Discharge fee similar
• Notary or lawyer can handle

Alberta

• Lower discharge costs
• Faster discharge processing

Selling with a mortgage is straightforward, but penalties can be significant. Consider porting if you're buying again. Always get a payout statement early. For financial planning, use our Calculators, particularly the Mortgage Renewal Calculator. Visit the AI Advisor for personalized advice.

This guide is for educational purposes only.