Consider mortgage and timing risks before selling, Toronto broker urges buyers
Canada’s housing market is showing signs of recovery, with home sales across the country rising by 3.8% from the previous month and marking a fourth consecutive monthly increase.
That continuing trend has raised hopes that buyers will continue returning to the market after trade tensions with the US and prolonged economic uncertainty cast a deep chill over the housing outlook in the opening quarter of the year.
Shaun Cathcart, a senior economist at the Canadian Real Estate Association (CREA), said a “long-anticipated post-inflation crisis pickup in housing” appeared to have arrived.
But as more homeowners consider entering this shifting market, mortgage expert Leah Zlatkin is warning sellers about potential financial pitfalls. Zlatkin, a licensed mortgage broker and expert at LowestRates.ca, emphasized that focusing solely on market prices without considering mortgage implications can lead to costly surprises.
“Homeowners often focus on what their property might fetch in today’s market, but overlook the real financial impact their mortgage can have on the proceeds,” says Zlatkin. “The last thing you want is to sell your home and then realize you’re facing unexpected costs that wipe out much of your equity.”
Zlatkin identifies three critical mortgage considerations for homeowners contemplating a sale. First, many with fixed-rate mortgages may face substantial early payout penalties. “Depending on how your lender calculates this – often the greater of three months’ interest or an interest rate differential – it can easily add up to thousands, or even tens of thousands of dollars, substantially cutting into what you walk away with,” she explained.
Second, homeowners should explore mortgage portability options, which allow transferring existing mortgages and interest rates to new properties. While this can help avoid penalties, porting comes with strict timelines and conditions.
“If the new property doesn’t meet the lender’s requirements or if closing dates don’t align, sellers could lose the ability to port and end up paying the very penalties they hoped to avoid,” Zlatkin warned.
The third concern involves timing risks. With buyers taking more time to decide, homes aren’t moving as quickly as last year. In the GTA [Greater Toronto Area], escape clauses allowing buyers to withdraw if their own sales don’t close are becoming more common.
“Many homeowners don’t realize how closely the timing of their sale is tied to their ability to close on the next property,” says Zlatkin. “If a buyer backs out or your home sits, it can jeopardize your financing or push you into more expensive options.”
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