Expert: Cinzia Dalgarno - 5/10/2010

Question
Hi there,

This is a fantastic site. Thanks for taking the time to answer! My husband and I renewed our mortgage in Ontario last year. We are considering selling our home and moving to Newfoundland, where we intend to have a house built. The new home will likely not be ready until December 2010, but we would like to move back to Newfoundland this summer and will stay with relatives. The mortgage required for the new home would be around the same amount as what we have now.

Would our bank be open to us continuing to pay on the mortgage while our new home is being built, even though we wouldn't technically own the property at that point? How can we sell our house in the next month or two and get the home we want built but avoid paying fees and such. There is no possible way we could finish having our home built within the 90 days indicated by the bank. We haven't yet approached them with this scenario, but I am hoping they would consider us solid customers, presently and in the future.

Thanks so much,
Nicole

Answer
Hi Nicole. I'm afraid there doesn't seem to be an easy way out, based on the info you've given me.
What you are asking for is for your lender to basically give you the equivalent of your current mortgage amount, unsecured, until such time as you're ready to "purchase" the home in NF. While of course everything depends on everything else (ie, your networth, what the current balance is on your mortgage, etc), that is highly unlikely to happen, no matter how well you are regarded by your lender.
Another option would be to rent out your existing home now, move back to NF, and list it in the Fall, closer to the completion date of the new house. This would not only allow you to avoid prepayment penalties, but would likely pay your existing mortgage for the months while it's rented.
Hope this was helpful to you,
Warm regards,
Cinzia