How do I sell if I still have a mortgage?
“Can I sell my house if I still have a mortgage?” — Yes. Do it the right way and you keep cash, avoid penalties, and close on time.
Quick, Honest Answer
You can sell a home in Milton even if you still owe on the mortgage. But you must plan: get a mortgage payout statement, know your prepayment penalties, check portability, and hire a real estate lawyer in Halton. Do these before you list. Miss one step and the sale can stall or cost you thousands.
Straight Plan — What to do first (action items)
- Call your lender and request a mortgage payout statement (valid ~30 days).
- Read your mortgage contract for prepayment rules and portability. Note IRD or three-month interest for penalties.
- Talk to a local real estate lawyer to confirm discharge timeline and fees.
- Calculate your net proceeds: sale price minus mortgage payoff, commissions, legal fees, and adjustments.
- Decide: port the mortgage, pay out, use a bridge loan, or negotiate with the lender if sale won’t cover the debt.
This is not a negotiation you wing.
The Legal & Paperwork Roadmap (Step-by-step)
- Mortgage payout statement
- What it is: a written number from the lender showing the exact amount required to pay off the mortgage on a specific date.
- Why it matters: this number is required by your lawyer and for your net-proceeds calculation. It typically expires after 30 days.
- Check the mortgage terms
- Portable mortgages: If your mortgage is portable, you may transfer it to a new purchase with the same lender and avoid penalties.
- Prepayment penalties: For fixed-rate mortgages in Canada you often pay an Interest Rate Differential (IRD); for variable mortgages it’s usually 3 months’ interest. These can be large. Get estimates.
- Title and encumbrances
- Your lawyer performs a title search to see if other charges (second mortgages, HELOCs) exist. All registered charges must be cleared at closing.
- Discharge of mortgage
- Process: your lawyer arranges the lender to discharge the mortgage on closing day so the buyer receives clear title.
- Timing: lenders typically need several business days to prepare discharge documents. Confirm timelines early.
- Fees: lenders charge a discharge administration fee and your lawyer charges for handling the documents.
- Statement of Adjustments and closing
- Your lawyer prepares a statement that accounts for property tax, utilities, condo fees, and other prorated items. The mortgage is paid from the sale proceeds and any surplus is transferred to you.
- If sale proceeds are less than mortgage (shortfall)
- Negotiate with the lender immediately. Options include short payoff agreement, refinancing, or deed in lieu (rare in Canada). Engage a lawyer — do not ignore the lender.
Milton, Ontario — Local Rules and Market Nuances
- Regional context: Milton is in Halton Region, within the Greater Toronto Area commuter belt. Prices move fast and listings often attract multiple offers. Use market momentum to your advantage when timing a sale.
- Land Transfer Tax: Paid by the buyer in Ontario (provincial LTT). Milton sellers don’t pay LTT but must be ready for buyer conditions tied to financing.
- Local legal resources: Use a Halton/Peel real estate lawyer familiar with Milton closings. Local lawyers know the lenders active in the area and the fastest discharge processes.
Common Options and When to Use Them
- Port the mortgage: Use if you’re buying another house and your lender allows porting. This avoids penalties but needs lender approval and timing alignment.
- Pay out the mortgage: Use if you have equity or proceeds from another source. You’ll need the payout statement and cash or proceeds at closing.
- Bridge financing: Use when your new purchase closes before your sale, or vice versa. A bridging loan covers the gap but costs interest and fees.
- Shortfall negotiation with the lender: Use when sale proceeds won’t fully cover the mortgage. Start conversations early and involve a lawyer.
Costs to Budget For
- Real estate commissions: Varies; typical in Ontario is 4–5% of sale price but can be negotiated.
- Mortgage prepayment penalty: Can be thousands. Check IRD or three months’ interest.
- Discharge/admin fee: Lender fee to remove the mortgage from title (~$200–$500, varies by lender).
- Legal fees and closing costs: Expect $1,000–$2,000 for standard residential closings.
- Title insurance and closing adjustments: Add a few hundred dollars.
Timeline — Sample (Realistic)
- Day 0: Request payout statement and confirm mortgage terms.
- Day 1–7: Meet with realtor, sign listing agreement, start marketing.
- Day 7–30: Showings, offers, accept an offer.
- Day 30–45: Lawyer orders discharge, prepares closing documents; mortgage payout statement refreshed if expired.
- Closing Day: Sale proceeds used to pay lender; buyer gets title.
Timelines compress or stretch depending on financing, buyer conditions, and lender turnaround.
If You’re Behind on Payments or Facing a Lender Taking Action
- Don’t hide. Contact your lender and a lawyer immediately.
- Lenders can exercise power of sale under Ontario’s Mortgages Act. Selling voluntarily lets you control timing and often minimize losses.
- If you’re in arrears, a short-sale style negotiation or lender-approved sale can avoid the long-term damage of a forced sale.
Condo Sellers — Extra Paperwork
- Provide condo documents: status certificate, condo fees, and any pending special assessments. Buyers will request these early.
- Condo sales are subject to different timelines because of buyer review periods — plan accordingly.
Practical Net-Proceeds Checklist (before listing)
- Get current mortgage payout quote.
- Estimate realtor commission and legal fees.
- Confirm prepayment penalty and add to costs if applicable.
- Add bridge financing costs if you’ll use it.
- Build a small contingency fund — $2,000–$5,000 — for unexpected holdbacks or repairs requested after inspection.
Why a Local Realtor + Lawyer Matters in Milton
This is about timing and relationships. Local lenders, appraisers, and lawyers in Halton know the fastest paths for discharge and the common speed bumps. An experienced team will get the payout numbers, secure discharge windows, and coordinate closing dates so buyers don’t walk and you don’t lose money.
If you want help running these numbers, lining up a Halton real estate lawyer, or preparing your listing so you net more at closing, contact Tony Sousa. He works with local lawyers and lenders and can map your exact net proceeds and strategy.
Contact: tony@sousasells.ca | 416-477-2620 | https://www.sousasells.ca
FAQ — Selling with a Mortgage in Milton, Ontario
Q: Can I sell if my mortgage has a prepayment penalty?
A: Yes. You must factor that penalty into your costs. Ask for a payout statement and penalty estimate. Compare penalty vs market advantage (selling quickly might offset penalty costs).
Q: What is mortgage portability and how does it help?
A: Portability lets you transfer your mortgage to a new purchase without penalty. It requires lender approval and matching loan terms. It’s useful if you’re buying another home in Milton or nearby.
Q: How long does mortgage discharge take in Ontario?
A: Typically several business days to prepare documents; your lawyer will arrange timing so discharge happens on closing day. Start the process early.
Q: Will the lender accept less than I owe if the sale price doesn’t cover the mortgage?
A: Lenders may negotiate a short payoff, but they aren’t obligated. Start discussions early; get a lawyer involved. A negotiated sale beats a power of sale for the borrower’s credit record.
Q: Do I pay capital gains tax when I sell my home in Milton?
A: If it’s your principal residence in Canada, you generally qualify for the principal residence exemption. If it’s a rental or investment property, you’ll likely owe capital gains tax. Consult an accountant.
Q: Who pays for the mortgage discharge fee?
A: The seller typically pays the lender’s discharge fee and their lawyer’s fees to handle the discharge.
Q: What if my mortgage has a second charge or HELOC?
A: All registered charges must be cleared at closing. Your lawyer will request payout statements for those and arrange discharges.
Q: Is HST charged on home resale in Milton?
A: No. Resale homes are generally exempt from HST. New builds and substantially renovated homes may be subject to HST—get legal advice.
Q: Should I get a lawyer in Milton or Toronto?
A: Use a Halton-area real estate lawyer familiar with local lenders and the Milton market. They’ll be faster with local title offices and lender contacts.
Q: If I need to bridge two closings, what are my options?
A: Talk to your lender about bridge financing or a short-term mortgage advance. Understand interest, fees, and repayment terms.
If you want a straight, no-fluff net-proceeds calculation, or help lining up a Halton real estate lawyer and lender contact, email tony@sousasells.ca or call 416-477-2620. He’ll give you a clear plan and the exact numbers you need to sell without surprises.
