Mortgage Penalties: Always Check with Your Mortgage Lender/Broker Before You Sell.
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A lot of people assume that when they sell a property they can pay off the principal of their mortgage with the sale proceeds and be done with their lender.
This is not the case.
A mortgage is a legally binding contract between you and your lender for you to pay them a stream of principal and interest payments for the term of the mortgage. The lender will have something in the small print of the mortgage they can get either 3 months interest or an interest rate differential. Any way you slice it, if you’re going to end a mortgage early there will be costs and they can be high.