What Is the Prepayment Penalty If I Sell My Home Before My Mortgage Term Ends in BC?
This answer covers the law of British Columbia.
The penalty depends on the wording of your mortgage contract, so the first step is to read it or ask your lender how it would calculate the amount if you sell before the term ends. Lenders often use either a set number of months of interest or an interest rate comparison, and the results can differ a lot between lenders and between fixed and variable mortgages.
One federal rule can limit the cost. If a mortgage is not payable until more than five years after it was made, the borrower may, after five years, pay off the amount owing plus three months' interest in place of notice, and no further interest is chargeable. That rule does not cover mortgages given by corporations or certain prescribed entities.
Whether you can port your mortgage to a new home or blend your existing rate into a new loan is up to your lender and your contract. Ask for a written payout figure before you commit to a sale date, and have a lawyer review the contract if the amount is large. Because the penalty is paid out of your sale proceeds, it affects how much you take home.
Key takeaways
- Your mortgage contract sets out how the penalty is calculated, so read it or ask your lender for a written figure before you list.
- After five years on a mortgage that was not payable until more than five years after it was made, you may pay off the amount owing plus three months' interest in place of notice.
- That five-year rule does not apply to mortgages given by corporations or certain prescribed entities.
- Porting or blending is up to your lender and your contract, so confirm the terms in writing before you rely on either option.