Most of us think that paying out the Mortgage in full before the mortgage is due is a good thing. Unfortunately, Banks do not look at it the same way.
When you selling the property it is very important to contact your Bank and find out if there will be a penalty for you to pay out the Mortgage sooner. Mortgage will be paid out as a result of your sale. Your mortgage terms specify that on early pay-out, the penalty will equal to 3 months of interest or interest rate deferential, whatever is higher. It is good idea to get the answer to your question from the bank in writing.
If your penalty is very high, you may want to negotiate the penalty with your bank, by obtaining the new Mortgage with them on the new property that you are buying. Alternatively you can ask your bank about your “pre-payment privileges”. That will allow you to –possibly pre-pay part of the loan without being penalized.
Being proactive about the penalties can save you thousands of dollars that you can later use for vacation or new furniture for the house. If you have any questions, please do not hesitate to call me with additional questions.Yours in Real Estate
Irina Bartnik Notary.
604-575-7494
