House for sale, mortgage may mature before it sells

If the house hasn't sold and closed by the maturity date they will only have two options:

1) Pay out the remaining balance in cash or;

2) Get a new mortgage. Renewing with their existing lender would likely make the most sense as they won't have to go through the application process again and even if the rate is a bit higher, it won't matter if they are selling as they won't be carrying it for very long.

They will receive a renewal package and only have to indicate the new term they would like. Unless they want more $$$, they don't have to re-apply. If they will definitely sell at some point, they should select an open mortgage.

If the house sells they (or their lawyer) will request a pay-out statement, otherwise, status quo.

Are they buying a new house? Downsizing? I ask as there is a fee to terminate a closed mortgage (assuming it's not ported over to a new house). If they will not have a mortgage after they move they should get an open mortgage, it'll be at a higher rate but they won't have a penalty to pay which could be substantial.

Thats perfect actually... if it matures before it sells, you can switch to an open term.
Save lots of money on mtg breakage fees.

@fizzerd How much equity do they have in the house? It might be easier to have their bank give them a HELOC and port the remaining balance over to that. Until they sell they will only be paying the interest charges/month and it can be closed at any time with payout, no penalty.

With low income they may not qualify for a HELOC. They are better to roll it over into an open mortgage.

What's the location? In Ontario houses are selling 20% above asking in within 0-3 days of entering the market. I suspect this scenario is very unlikely unless your parents are looking for some unusually high amount (even by the standards of the current market)

LookingForStuffNow wrote: ↑ What's the location? In Ontario houses are selling 20% above asking in within 0-3 days of entering the market. I suspect this scenario is very unlikely unless your parents are looking for some unusually high amount (even by the standards of the current market)

You make it sound like this is the case in the entire province of Ontario.
Highly highly unlikely.

rcmpvet wrote: ↑@fizzerd How much equity do they have in the house? It might be easier to have their bank give them a HELOC and port the remaining balance over to that. Until they sell they will only be paying the interest charges/month and it can be closed at any time with payout, no penalty.

dougboswell wrote: ↑With low income they may not qualify for a HELOC. They are better to roll it over into an open mortgage.

LookingForStuffNow wrote: ↑What's the location? In Ontario houses are selling 20% above asking in within 0-3 days of entering the market. I suspect this scenario is very unlikely unless your parents are looking for some unusually high amount (even by the standards of the current market)

taxrage wrote: ↑ They will receive a renewal package and only have to indicate the new term they would like. Unless they want more $$$, they don't have to re-apply. If they will definitely sell at some point, they should select an open mortgage.

If the house sells they (or their lawyer) will request a pay-out statement, otherwise, status quo.

More than 60% in equity. They havent received renewal letter yet so they are bit worried. They have low income so dont think heloc will be available to them. I believe to get this 20% over asking you have to price it right.

fizzerd wrote: ↑ More than 60% in equity. They havent received renewal letter yet so they are bit worried. They have low income so dont think heloc will be available to them. I believe to get this 20% over asking you have to price it right.

I think you said it renews in...April? Too early for renewal letter. Wait until March, but it's possible the bank is looking at their age.

Clacker wrote: ↑ If the house hasn't sold and closed by the maturity date they will only have two options:

2) Get a new mortgage. Renewing with their existing lender would likely make the most sense as they won't have to go through the application process again and even if the rate is a bit higher, it won't matter if they are selling as they won't be carrying it for very long.

They could renew into a HELOC or open mortgage to make things easier and avoid prepayment penalties when they sell.
The last thing they should do is go into a fixed / closed mortgage.

Jucius Maximus wrote: ↑ They could renew into a HELOC or open mortgage to make things easier and avoid prepayment penalties when they sell.
The last thing they should do is go into a fixed / closed mortgage.

Agreed closed would be a big mistake. Whenever I've received a renewal letter it's stated that if I made no decision it would automatically roll over into an open mortgage. Not sure if that's with all lenders or just the 3 I've worked with. As OP stated, HELOC is unlikely to be an option.

Clacker wrote: ↑ Agreed closed would be a big mistake. Whenever I've received a renewal letter it's stated that if I made no decision it would automatically roll over into an open mortgage. Not sure if that's with all lenders or just the 3 I've worked with. As OP stated, HELOC is unlikely to be an option.

@fizzerd Yet the OP will not know unless they ask the bank. In my recent purchase I was able to secure a HELOC for 1/3 the purchase price as opposed to having a fixed or variable rate mortgage on a fixed income, albeit very good pension entitlement. Even though the interest was slightly higher I was able to pay down very quickly with no fixed payments other than interest only calculated monthly. Additionally the OP also stated there is over 60% equity, that is almost 2/3.