Is it possible to sell before finishing paying off your mortgage ?

Divorce, loss of a spouse, unemployment, retirement, job relocation, or even the birth of a child... There are countless reasons to want to part with your property, even before fully paying off your mortgage. Do you have the right to do so, and most importantly, what will the consequences be? Here’s what you need to know.

You are free to dispose of your property as you see fit

No law requires you to wait for a minimum period before reselling a property you purchased with a mortgage. The reason is simple: you are the owner! Therefore, no bank can prevent you from selling it. You have two options: either repay your mortgage early as soon as your property is sold, or – if a clause in your loan agreement allows it – transfer your mortgage to acquire a new home.

Beware of early repayment penalties !

Although your bank cannot oppose the sale of your property with an outstanding mortgage, it can require you to settle the loan upon the sale’s conclusion. But be careful! "Early repayment" often comes with "repayment penalties." When you took out your mortgage, you agreed to a specific repayment term and interest rate with your bank. To compensate for the loss of profit from this sudden acceleration, your bank will most likely charge early repayment penalties (ERP).

To find out the amount of these fees, you must refer to your loan agreement, which is legally required to mention them. These fees are regulated by law (Article R313-25 of the Consumer Code): they cannot exceed six months' worth of interest or 3% of the remaining principal. Thus, the earlier you sell, the higher the repayment fees. Conversely, the closer you are to the end of your repayment, the lower the penalties will be.

If your loan was signed after July 1, 1999, your bank cannot charge early repayment penalties if the sale is due to job relocation, dismissal, or death.

What if you kept your loan for a new purchase ?

Good to know : there is an alternative to avoid paying early repayment penalties! After selling your property, and with your bank’s agreement, you can also transfer your existing loan to finance the purchase of a new property. Your contract will be amended so that the mortgage applies to your new purchase, but the interest rate and loan duration will remain the same. Another advantage: you will also keep your insurance. Note that if the purchase of your new property occurs before the sale of the old one, you may opt for a bridging loan.

If your property is mortgaged, you are required to repay your loan in advance.

Source : edito.seloger.com