Canada Home Sales: Preparing Your Finances

So if you're ready to sell your home there will be a lot to consider. Of course actually finding a buyer and finalizing a sale, is only part of the process. You also have to prepare your finances. Everyone's financial situation might be a little different depending on your circumstances. So here are some things to look for.

Capital Gains Tax

The sale of your home in some rare instances may require that you pay a capital gains tax on some of your profits. This will not apply if the home you're selling is your sole and primary residence. However, it may apply to other situations. For example if your house is a summer home, or a vacation getaway spot (maybe a beach house) the tax will likely apply. It will also apply if your home is a rental property complete with tenants and their lease agreements, and if you are profiting from the home in some way. You will want to keep this in mind when selling and make sure you file. You should also factor in the tax when determining your asking price if this is the case.

Do You Have a Portable Mortgage?

If your mortgage is portable you are in a pretty strong and flexible financial situation. This literally means that you can take your current mortgage and simply transfer it to the cost of the new home. It also means you may be able to land a lower interest rate if you play your cards right. Consider the cost of your new home in this as well, if it is more than you put down on the current house you might need to borrow additional mortgage to cover the difference.

Discharging Mortgage

Discharging your mortgage simply means you are using the money you get from selling your home to pay it all off in one shot. This is handy especially if you have an open mortgage because you won't suffer any penalties. If your mortgage is closed however, you may be facing certain penalties or charges that will be determined by how much you still owe on the house as well as how much estimated time remains for you to pay it off.

Are you Buying First?

Maybe you've already found your new dream house and you're ready to buy, but you haven't sold yet. This could present a problem especially if you were planning on using the proceeds from the old home for the new home. There is something called “bridge financing” in which your lender when financing your transition between homes. In other words they will lend you the down payment for the new home until the old one sells. Generally they may only do this, however, if they're confident that your home will sell soon.

Mortgage “Transfer”?

In real estate sometimes you can enter an agreement with your buyer in which he or she will essentially “take over” your mortgage. This is referred to as “assuming” the mortgage. If possible this can be a very attractive financial feature of your home that will help it sell more quickly, especially if your rates are lower than those the buyer is currently paying.

Consider these factors as you prepare to sell. You may be able to get some helpful advice from an accountant or a real estate agent to help you as well.