When Must My Mortgage Be Paid Off?
HOA mortgages are required to be paid off under two circumstances. Please note that there is no income test affecting whether a mortgage has to be paid off.
One circumstance requiring repayment is if the purchaser no longer owns and lives in the home. This may occur for several reasons. For example, if the home is sold the mortgage must be repaid. Another situation that will require repayment is if the home is rented out after the first 2 years from the closing date of the purchase. Transferring any part of the ownership to someone else, including children or spouses will require repayment of the mortgage. Canada Revenue Agency (the taxman) has a rule that when an individual dies, property is deemed to have been sold. HOA mortgages contain the same rule which means the estate would be responsible for paying off the mortgage.
In situations where there are multiple purchasers or occupants, if one of the original purchasers moves out and at least another one of the original purchasers still owns and lives in the home, then the mortgage does not have to be paid out. As well, a new person can move into the home as long as one of the original purchasers still owns and lives in the home. It is also okay if one original purchaser sells out to another original purchaser. However, the mortgage would have to be paid off if a new person is added to the title to the home – this is an indirect sale of part of the home.
The other circumstance requiring repayment is if the first mortgage amount is increased to consolidate debts or to free up cash for some other purpose. Banks have a lot of different names for it – “debt consolidation”, “home equity loans”, “secured lines of credit”, etc. These products involve putting a larger mortgage on the title of the home, and asking Home Ownership Alternatives to “postpone” its mortgage to another financial institution. As a policy Home Ownership Alternatives does not grant postponements. Due to the need for affordable housing, repayment of the mortgage allows HOA to assist other new purchasers.
