What should i look for in a mortgage, to minimize penalties

[Rocky]

Hello all, What should one look for in the mortgage (to minimize penalties) if one if buying a home with an intention to sell it asap after closing, understanding that assignment isn't an option, and mortgage will be required to close - what specific items should one negotiate with the lender to ensure there is a limited/minimum cost as the prime reason for the mortgage is to close the home and sell it right after.

All advice is welcome and appreciated.

 

[Torontotony]

Hello Rocky,

The least expensive method of financing a property purchased for a quick sale, is the HELOC. Typically, a HELOC is priced by lenders at Prime + 1/2 to 1%, but are fully open (no prepayment/repayment penalties) and have the option of carrying on an interest only basis. HELOC's all require a minimum downpayment of 20%, however, given the tone of your question, I don't think you would want to pay mortgage insurance premiums for short term financing.

Hope this helps.

Regards,
Tony

 

[Rocky]

Hello Rocky,

The least expensive method of financing a property purchased for a quick sale, is the HELOC. Typically, a HELOC is priced by lenders at Prime + 1/2 to 1%, but are fully open (no prepayment/repayment penalties) and have the option of carrying on an interest only basis. HELOC's all require a minimum downpayment of 20%, however, given the tone of your question, I don't think you would want to pay mortgage insurance premiums for short term financing.

Hope this helps.

Regards,
Tony

Tony, Thank you for this piece of information, being a rookie at this stuff - this is all news for me, I will certainly look in depth for HELOC, Just another dumb question - lets say if i have 20% dp - what else is required for HELOC and who should one connect with to get HELOC, are these regular banks that provide mortgage financing as well and whats the catch with HELOC if they have no repayment penalties

 

[Torontotony]

There really aren't any catches or limiting conditions to a HELOC. Basically, it is Line of Credit, secured by real estate, which allows you the maximum flexibility of any mortgage product. Should you choose, but in your case this would not be advisable given you are looking to sell the property quickly after taking possession, you can also incorporate a traditional fixed or variable rate mortgage term into the HELOC. It is not advisable as interest penalties would apply should you opt for anything other than a standard HELOC, with interest only repayment at Prime + ??%.

The alternative to the HELOC would be a traditional Open mortgage, but most lenders charge a substantial interest rate premium on these, because they know the mortgage will be on their books for a short term.

Related legal costs are the same for a HELOC as it would be for a traditional mortgage. Sometimes an appraisal fee would apply, but this can hold true for any mortgage product where the downpayment is greater than 20% (Conventional financing).

As for contact, you're best advised to speak to a mortgage professional, be it an independent mortgage broker or one of the bank reps.