Selling your home marks the start of something new—whether you’re making room for a growing family, downsizing into simplicity, or relocating for your next opportunity. If you are wondering ‘Can you sell a house with a mortgage?” Not to worry! If still have a mortgage, you’re not alone. In fact, most homes sold in Ottawa still carry an active mortgage at the time of sale.

The good news? With the right support, the process is straightforward and entirely manageable.

In this guide, we’ll walk through what happens to your mortgage when you sell, how it gets paid out, transferring a mortgage from one house to another (how to port a mortgage), and what to keep in mind as you plan your next chapter.

What Happens to Your Mortgage When You Sell?

It’s normal to wonder what happens to your mortgage when you sell your house and don’t buy another. In short, when you purchased your home, your lender registered a mortgage against the property. That loan doesn’t disappear when you succeed in selling a house with a mortgage—but that mortgage is paid off as part of the closing process.

Once your sale is finalized, the buyer’s funds are sent to your lawyer, who will:

• Pay off your outstanding mortgage balance
• Cover legal and real estate-related costs
• Transfer the remaining funds to you

Once your lender receives full payment, the mortgage is discharged from the property title, allowing for a clean transfer to the new owner.

Planning on selling your home? Check out these related blogs next!

• What Is Power of Sale?
• How to Choose a Real Estate Agent
• What Not to Fix When Selling a House

Before You List: Request a Payout Estimate

One of the first steps we recommend is asking your lender for a mortgage payout estimate. This gives you a sense of:

• How much you still owe
• Whether you’ll face any penalties for breaking your mortgage term
• What your net proceeds from the sale might look like

You’ll also want to review your mortgage agreement for any fine print around timelines, prepayment clauses, or porting options. This early insight helps you make confident, informed decisions when it comes to pricing, timing, and next steps.

On Closing Day: Behind the Scenes

Much of the closing process happens behind the scenes—but understanding the flow can bring peace of mind.

Here’s how it typically works:

1. The buyer sends the agreed purchase funds to your real estate lawyer.
2. Your lawyer uses these funds to:

• Pay off your remaining mortgage (based on the lender’s payout statement)
• Cover legal and agent fees, and clear any other registered debts or liens

3. The remaining proceeds are sent to your account.
4. Your lender formally discharges the mortgage from the property title.

In most cases, it all happens in a matter of hours, giving you peace of mind (and financial closure) as you hand over the keys.

Want to prepare your home for a smooth sale? Check out these related blogs for more selling tips.

• How Soon Can I Sell My Ottawa Home?
• What If My Home Doesn’t Sell?
• How to Handle Multiple Offers as a Seller in Ottawa

What About Prepayment Penalties?

If you’re still within your mortgage term when you sell, you may be charged a prepayment penalty for ending your contract early. These penalties vary depending on your lender and the type of mortgage you hold.

Here’s a broad overview:

• Variable-rate mortgages often come with a penalty equal to three months’ interest on your current balance.
• Fixed-rate mortgages typically use something called the Interest Rate Differential (IRD), which compares your original rate to the current rate for a similar term.

Since every mortgage is structured differently, it’s important to speak with your lender or mortgage advisor early to understand how this might apply to your situation.

Can You Transfer Your Mortgage to a New Home?

Yes—if your mortgage is portable, you may be able to transfer it to your next property. This is called porting a mortgage.

This means you can ‘port’ or carry over your existing interest rate, remaining term, and loan balance—saving you from potential penalties and keeping your rate intact.

How to port a mortgage; most lenders require the following:

• The closing date on your new home usually needs to fall within a specific timeframe—often 30 to 90 days from the sale of your current property.
• You still qualify for the mortgage amount based on your income, debt levels, and credit standing—just as you did when you first secured the loan.
• The home you’re buying must meet your lender’s approval based on its value, condition, and location.

Porting doesn’t work for everyone, but for some homeowners, it offers a convenient and cost-effective way to transition between homes.

What If Your Home Sells for Less Than You Owe?

While it’s relatively rare in Ottawa’s market, there are situations—especially after peak market cycles—where a home may sell for less than the remaining mortgage. This is known as negative equity, and in these cases, the difference would need to be paid out at closing.

While no one can control broader market conditions, what you can control is how your property is positioned, presented, and priced in today’s climate. A thoughtful, experienced team can guide you through those decisions and help you move forward with as much clarity—and dignity—as possible.

Other Costs to Keep in Mind

While your mortgage may be the largest financial consideration, it’s not the only one. A few other costs may come into play, depending on the specifics of your sale:

• Legal and discharge fees
• Realtor commissions
• Prepayment penalties, if you’re ending your mortgage term early
• Bridge financing or short-term accommodations, if your purchase and sale don’t align perfectly

Every home sale is different, and a well-prepared plan will take into account both the expected and the unknown. With the right guidance, these details become manageable—and you can move forward with confidence, knowing nothing has been overlooked.

Whether you’re upgrading, downsizing, or simply exploring what’s next, we’re here to guide the process with clarity, care, and trusted experience. From guiding you through each step of the sale to connecting you with trusted mortgage professionals, we’ll ensure the process feels seamless—so you can stay focused on what’s ahead.

Selling your Ottawa home? The Wright Team is here to help. Call 613-692-0606 or send us an email at info@ottawahomes.ca to get in touch.