Real Estate

Mortgage / Secured Line of Credit - No fees to close

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  • Nov 10th, 2020 9:35 pm
[OP]
Deal Expert
Aug 2, 2001
16792 posts
7032 upvotes

Mortgage / Secured Line of Credit - No fees to close

Unfortunately I need to finance a property with the strict purpose of selling it within 6 months. I am not too familiar with mortgages, but what I need is a mortgage (or secured line of credit) that can be paid off at any time and closed completely. Hopefully this is simply something I need to finance for 6 months or so.

I am going to contact a mortgage broker, but as part of my research I would like to have an idea of what is possible so that I know they are not misleading me (I suspect that any commission they receive on such a short term loan will be minimal). Are there products out there where I can finance a property for such a short period of time without paying large fees to open/close?

I really don't want to dip into my investments for this and trigger a bunch of capital gains, so I would prefer to just finance for a short period of time. I am just not sure what sort of fees such a short term will incur beside the obvious legal fees and appraisal (I assume that won't be covered?).

Thanks!
6 replies
Jr. Member
User avatar
Jun 3, 2019
173 posts
146 upvotes
GTA
TrevorK wrote: Unfortunately I need to finance a property with the strict purpose of selling it within 6 months. I am not too familiar with mortgages, but what I need is a mortgage (or secured line of credit) that can be paid off at any time and closed completely. Hopefully this is simply something I need to finance for 6 months or so.

I am going to contact a mortgage broker, but as part of my research I would like to have an idea of what is possible so that I know they are not misleading me (I suspect that any commission they receive on such a short term loan will be minimal). Are there products out there where I can finance a property for such a short period of time without paying large fees to open/close?

I really don't want to dip into my investments for this and trigger a bunch of capital gains, so I would prefer to just finance for a short period of time. I am just not sure what sort of fees such a short term will incur beside the obvious legal fees and appraisal (I assume that won't be covered?).

Thanks!
Ask for an open mortgage, and as long as you qualify there shouldn't be any additional fees vs a regular closed mortgage. Open just means that you can pay if off at any time and because of this flexibility your rates would be higher. Depending on what those rates are, it might decrease your affordability because you qualify at the qualifying rate or your offered rate + 2% (whichever is higher).

If you already own a home and want to tap into the equity you can also go with a HELOC, which can be paid off at any time.
Realtor® & Mortgage Agent
[OP]
Deal Expert
Aug 2, 2001
16792 posts
7032 upvotes
trebmember wrote: Ask for an open mortgage, and as long as you qualify there shouldn't be any additional fees vs a regular closed mortgage. Open just means that you can pay if off at any time and because of this flexibility your rates would be higher. Depending on what those rates are, it might decrease your affordability because you qualify at the qualifying rate or your offered rate + 2% (whichever is higher).

If you already own a home and want to tap into the equity you can also go with a HELOC, which can be paid off at any time.
Thanks - I knew there must be something!

The rates seems higher for the open mortgages so I'll have the crunch the numbers to see what the number of months is where it works out better to pay the penalty of a closed mortgage. The market isn't great so I do expect it'll sit for sale for awhile.

Thanks again, that's exactly what I needed to know about!
Jr. Member
Jun 8, 2009
152 posts
46 upvotes
Toronto
You can get a bank mortgage of 1 year at 2.54% fixed.
Let me know if you have any questions.
TrevorK wrote: Thanks - I knew there must be something!

The rates seems higher for the open mortgages so I'll have the crunch the numbers to see what the number of months is where it works out better to pay the penalty of a closed mortgage. The market isn't great so I do expect it'll sit for sale for awhile.

Thanks again, that's exactly what I needed to know about!
Deal Fanatic
User avatar
Feb 2, 2014
8965 posts
2567 upvotes
Toronto
TrevorK wrote: Unfortunately I need to finance a property with the strict purpose of selling it within 6 months. I am not too familiar with mortgages, but what I need is a mortgage (or secured line of credit) that can be paid off at any time and closed completely. Hopefully this is simply something I need to finance for 6 months or so.

I am going to contact a mortgage broker, but as part of my research I would like to have an idea of what is possible so that I know they are not misleading me (I suspect that any commission they receive on such a short term loan will be minimal). Are there products out there where I can finance a property for such a short period of time without paying large fees to open/close?

I really don't want to dip into my investments for this and trigger a bunch of capital gains, so I would prefer to just finance for a short period of time. I am just not sure what sort of fees such a short term will incur beside the obvious legal fees and appraisal (I assume that won't be covered?).

Thanks!
You will have to do a breakeven analysis.

You can get a HELOC, which is 100% open, but the rate is Prime +.50% usually.

You can refinance a variable rate mortgage, but the you have to pay a 3 month interest penalty if you break. The rate however will be around Prime -.80% for a refinance (1.30% cheaper than the HELOC).

So compare the interest rate savings to the higher penalty. The longer you carry the loan, the better the variable rate is due to the interest rate savings.
Kevin Somnauth, CFA
Principal Broker - First Toronto Mortgage - MA (Ontario #13176, BC #X301007)
Real Estate Salesperson - Century 21 Innovative
[OP]
Deal Expert
Aug 2, 2001
16792 posts
7032 upvotes
CdnRealEstateGuy wrote: You will have to do a breakeven analysis.

You can get a HELOC, which is 100% open, but the rate is Prime +.50% usually.

You can refinance a variable rate mortgage, but the you have to pay a 3 month interest penalty if you break. The rate however will be around Prime -.80% for a refinance (1.30% cheaper than the HELOC).

So compare the interest rate savings to the higher penalty. The longer you carry the loan, the better the variable rate is due to the interest rate savings.
beemer2009 wrote: You can get a bank mortgage of 1 year at 2.54% fixed.
Let me know if you have any questions.

Thanks a lot!

Is there anything I should be looking for when selecting a mortgage broker? I assume there must be some differences between them but it seems like it should be pretty cut and dry (how could one get a better rate for example?).
Jr. Member
User avatar
Aug 14, 2020
178 posts
165 upvotes
Hamilton, ON
TrevorK wrote: Thanks a lot!

Is there anything I should be looking for when selecting a mortgage broker? I assume there must be some differences between them but it seems like it should be pretty cut and dry (how could one get a better rate for example?).
There is also P+0.2% for HELOC's right now. I'm not sure where you are but I'm licensed in Ontario, you can PM me for details.
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Getting a mortgage is like writing a test...except you're allowed to work with someone who knows the answers!

Kirby Reschny
Mortgage Agent
Real Mortgage Associates (FSRA #10464)

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