Take the Stress Out of Selling
Upsizing, downsizing, dividing property in a separation or estate or simply looking to move? Whatever the reason for selling and whatever type of property, we’ll work with you to ensure the process goes smoothly and help you to limit the likelihood of post-closing issues.
FAQ
How do I calculate the equity in my property?
To calculate equity, take the total sale price for the property and subtract all debts, liens, and charges against the property that must be paid as part of the sale transaction. In most cases, it is difficult to calculate the exact amount of equity because of uncertainties as to the balance of mortgage owing, the status of any mortgage tax account, the amount of the delay at land titles, and so on.
What are the typical payouts and expenses to consider?
Mortgage and/or Line of Credit
The balance of money you owe under your mortgage will reduce your equity. Don’t forget to include any pre-payment mortgage penalty. Unless your mortgage is at the end of term or is an “open” mortgage, you may have to pay a penalty to the lender to have it discharged early, and the amount of the penalty may vary considerably. While 3 months’ interest is the most common penalty, most mortgages contain a formula that allows for higher penalties if interest rates have dropped significantly.
If you took a cash-back incentive when you signed your mortgage and have not held the mortgage for the required period of time, you may have to pay back some or most of the cash-back amount you received. Also, there will be a discharge fee to pay to the lender, and the average amount is $100.00.
Mortgage payments are paid in arrears, meaning you make payments for the month prior rather than the current month. Typically, you must make mortgage payments that fall due on or before the possession date, and any interest accruing from your last payment will be added to the amount owing until we pay out your mortgage.
Mortgage Interest
You may receive interest, for the duration of the land titles delay, on the sale proceeds or part of the sale proceeds. You will pay interest, for the duration of the land titles delay, on any mortgage on the property and on any interim financing you have arranged (usually required when buying another house).
To calculate the amount of interest to be paid, work out the interest payable under your mortgage and/or interim financing to a daily figure and then multiply by the approximate land titles delay at the time. The interest that you will earn is harder to estimate and will depend on the amount of any mortgage the purchaser is getting on the property.
Real Estate Commission
Real estate commissions typically range from 5% to 7% of the selling price, and the seller’s lawyer must pay this from the sale proceeds upon completion of the transaction.
Home Improvement Loans
If you have such a loan through a utility company or government agency for home improvements such as a new hot water tank or furnace, new windows, or an alarm system, this loan will have to be paid out. Generally, it cannot be transferred to another home.
Personal Loans
If your home has been pledged as collateral for a personal loan, then the loan may have to be paid. Sometimes, a “collateral mortgage” or a “caveat” is placed against the home as additional security for a loan, and if so, it must be paid from the sale proceeds unless other arrangements are made with the lender.
Liens, Judgments, etc.
These are relatively uncommon, but if you have been involved in a lawsuit or other legal proceeding such that a lien for money has been registered against your title, it will have to be discharged, i.e., it will have to be paid out unless you can convince the lien holder to discharge it without payment in full.
Disbursements
There are costs that the seller of a house must pay but which, for convenience, the lawyer pays on behalf of the seller at the appropriate time. These costs include the mortgage discharge fee payable to land titles, title investigation charges, couriers, and other miscellaneous charges, all of which generally range from $115.00 – $220.00, depending on the specific transaction.