Job Relocation and Mortgage in Quebec | Complete Guide

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A job relocation, whether within Quebec, to another Canadian province, or internationally, poses significant mortgage challenges. The homeowner must quickly decide between three main options: selling the property, renting it out, or keeping it vacant. Each option has distinct mortgage, tax, and financial implications. Mortgage portability (porting) is a feature offered by some lenders that allows transferring an existing mortgage to a new property without prepayment penalty, preserving the rate and terms of the current loan. However, not all lenders offer this option, and conditions apply: the new property must generally be purchased within 30 to 120 days of selling the former property, and the borrower must requalify under current criteria. If portability is not available, selling the property before the term ends can result in a prepayment penalty (interest rate differential or three months' interest). Some employers offer relocation programs that may cover part of these costs. Renting out the property during the absence is a viable option, but the lender must be informed, as mortgage terms may change if the property is no longer a principal residence. Additionally, rental income is taxable in Canada. A mortgage broker can analyze all of these options and recommend the most advantageous strategy based on the client's particular situation, market conditions, and lender policies.

Job Relocation: Three Options for Your Mortgage

When an employer announces a job relocation, homeowners must quickly assess their mortgage options. Time is often pressing, as relocation deadlines are typically a few weeks to a few months away. Three main strategies are available: selling the property, renting it out, or using mortgage portability to transfer your loan to a new property.

Option 1: Selling the Property

Selling is often the simplest solution, especially if your relocation is permanent or long-term. If your mortgage term has not expired, you will need to pay a prepayment penalty. For a variable-rate mortgage, this penalty is typically three months' interest. For a fixed-rate mortgage, the penalty is the greater of three months' interest and the interest rate differential (IRD). The IRD can be substantial if rates have dropped since you signed your mortgage. The tax advantage is that capital gains on the sale of a principal residence are exempt from tax in Canada under section 40(2)(b) of the Income Tax Act.

Option 2: Mortgage Portability

Portability allows you to transfer your existing mortgage to your new property, keeping your current rate and terms. This option is particularly advantageous if you have an interest rate lower than current market rates. Portability conditions vary considerably from one lender to another. Most major Canadian banks offer this option, but Desjardins caisses and certain alternative lenders have different policies. The timeframe to complete the purchase of the new property is generally 30 to 120 days after the sale of the former one. You will need to requalify at the current qualifying rate.

Option 3: Renting Out the Property

If the relocation is temporary or the market is not favourable for selling, renting your property can be a sound option. However, it is necessary to inform your lender, as most residential mortgages require the property to be owner-occupied. The lender may accept the situation, modify your terms, or require conversion to a rental mortgage. Rental income must be declared as taxable income. You can deduct property-related expenses (mortgage interest, property taxes, insurance, maintenance, building dépréciation) on your tax return. If the property ceases to be your principal residence, a deemed change of use occurs for tax purposes, which may have implications for the principal residence exemption.

Bridge Financing for the Transition

If you need to buy in your new city before selling your current property, bridge financing offers a temporary solution. This short-term loan, typically 30 to 180 days, covers the gap between the two transactions. Interest rates on bridge loans are generally higher than the standard mortgage rate, often prime plus 1% to 2%. The lender usually requires a firm purchase offer on your current property before granting the bridge loan. A mortgage broker can coordinate the entire transition and ensure financing is in place for both properties.

Frequently Asked Questions

What is mortgage portability?

Mortgage portability (porting) allows you to transfer your existing mortgage to a new property while keeping the interest rate, balance, and current terms. This avoids the prepayment penalty. The timeframe to complete the transaction is generally 30 to 120 days, and it is necessary to requalify under the lender's criteria.

Can I rent out my home if I am relocated and keep my mortgage?

Yes, but it is necessary to inform your lender. Some residential loans contain an owner-occupier clause. The lender may modify the terms, require a different rate, or ask you to convert to a rental loan. Rental income is taxable and must be reported to the CRA and Revenu Quebec.

What penalties do I have to pay if I sell before my term ends?

For a variable rate, the penalty is typically three months' interest. For a fixed rate, it is the greater of three months' interest and the interest rate differential (IRD), which can amount to thousands of dollars. Check the exact conditions of your mortgage contract and request a written estimate from your lender.

Can my employer cover costs related to selling my property?

Many employers offer relocation programs that can cover mortgage penalties, selling costs (real estate broker commission, notary), moving costs, and sometimes even the difference in housing costs. These benefits are negotiable and should ideally be agreed upon before accepting the transfer. Note that some relocation benefits are considered a taxable benefit.

Can I have two mortgages if I buy in my new city before selling?

Yes, this is possible through bridge financing. This temporary loan covers the period between purchasing the new property and selling the former one. Both mortgages will be considered when calculating your debt service ratios (GDS and TDS). A mortgage broker can help you structure this transition.