Tips for Closing the Sale of your Home

Discharging Your Existing Mortgage

It’s common for many people when selling their home to use the proceeds from the sale to discharge or pay off their mortgage loan. If you have a fully open mortgage you can discharge it at any time without penalty. However, if it’s a fully closed mortgage then discharging it may require you to pay substantial penalties. This is often in an amount that is equal to several months interest payments.

There are ways to avoid these penalties such as taking a portable mortgage with you when you sell your present home and applying it to the home you buy. Depending on your specific sales objectives you may be able to time the sales completion to coincide with the end of the mortgage term.

Mortgage "Portability"

The portable mortgage allows you to take your mortgage with you (without penalty) if you sell your present home and buy another one. This can be very beneficial particularly if the interest rate on your mortgage is lower than the market rates at the time of your move.

If your new home requires a larger mortgage amount the additional funds required can usually be furrowed at the current market rate. Portability can also enable you to avoid substantial penalties in discharging a closed mortgage when you sell your home.

Bridge Financing

If you are planning to buy your next home before the sale of your current home is complete, you may want to consider bridge financing. Bridge financing enables you to borrow an amount equal to, or less than, the net proceeds you are expecting to realize on your sale. The to use these borrowed funds to purchase your next home. When the sale on your current home closes you can use the proceeds to pay off the short-term bridge loan plus interest.

Tax Implications of Selling Your Home

Under most circumstances, you will not have to pay tax on any capital gain (the increase of your home's value) when you sell your primary residence.

Estimating the Proceeds from the Sale of your Home

Use this handy worksheet to help you estimate the proceeds that you will have remaining after the sale of your home.

Income
Sale Price		$ __________________
Refund of pre-paid costs:
	Utilities	$ __________________
	Heating oil/propane	$ __________________
	Homeowner's insurance	$ __________________
	Real estate taxes	$ __________________
	Condominium maintenance fees	$ __________________
	Municipal assessments	$ __________________
Other Income		$ __________________

Total Income		$ __________________	A

Payments
Balance of mortgage loan		$ __________________
Interest on mortgage since last payment		$ __________________
Mortgage prepayment penalty		$ __________________
Other lender fees		$ __________________
Real estate tax pro-ration		$ __________________
Real estate commission		$ __________________
Legal fees		$ __________________
GST on professional fees		$ __________________
Other payments		$ __________________

Total Payments		$ __________________	B

Net Proceeds from Sale		$ __________________	A-B