Personal Finance

House for sale, mortgage may mature before it sells

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  • Feb 5th, 2021 11:37 am
[OP]
Sr. Member
Apr 26, 2007
653 posts
68 upvotes

House for sale, mortgage may mature before it sells

Hi there,

My parents getting their house ready for sale. Their current mortgage matures on April 1st and they should be putting their house up for sale in about 10 days. What happens if the house does not sell or the new buyer doesnt close by the current mortgage maturity date? I dont think they are in the position to be able to get another mortgage (retired with low income).
Thank my post if it helped!
13 replies
Deal Addict
Mar 10, 2010
1406 posts
385 upvotes
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.
Sr. Member
User avatar
Jan 15, 2017
951 posts
496 upvotes
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.
Jr. Member
Dec 5, 2017
188 posts
149 upvotes
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.
Deal Addict
Oct 13, 2014
2145 posts
1384 upvotes
Just Moved To Somewh…
@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.
“Before one can have a Clue they must first accumulate 10 Inklings. That said, all it takes is one bad post and you erase all Inklings & Clues accumulated'"
Deal Addict
Jul 11, 2010
1174 posts
239 upvotes
Toronto
With low income they may not qualify for a HELOC. They are better to roll it over into an open mortgage.
Doug Boswell
intelliMortgage Inc. Brokerage #12326
FSRA #MO09002332
Jr. Member
Jul 10, 2020
121 posts
146 upvotes
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)
I write an investing blog
Deal Fanatic
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Aug 24, 2016
7878 posts
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The Prairies
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.
[OP]
Sr. Member
Apr 26, 2007
653 posts
68 upvotes
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.
Thank my post if it helped!
Sr. Member
User avatar
Jan 15, 2017
951 posts
496 upvotes
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.
Deal Expert
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Aug 18, 2005
20030 posts
4592 upvotes
Burlington-Hamilton
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.
What if there were no hypothetical questions?
Deal Addict
Mar 10, 2010
1406 posts
385 upvotes
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.
Deal Addict
Oct 13, 2014
2145 posts
1384 upvotes
Just Moved To Somewh…
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.
“Before one can have a Clue they must first accumulate 10 Inklings. That said, all it takes is one bad post and you erase all Inklings & Clues accumulated'"

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