5 most common reasons for people to break their mortgage
There very well could be a time when you need to break your mortgage before the term is up. It is actually not an uncommon situation that we see often.
When you do find yourself in a position where you need to break your mortgage with your current lender, know that there are penalties. And they could get expensive. Every lender has a formula on penalty calculation and it varies from lender to lender. Most of us assume it will be a 3 months penalty but that is not the case if you are in a fixed rate mortgage.
The penalty is a very important consideration that we walk our clients through to make sure that, financially, this makes sense for them.
1. Home sale and purchase of a new home
When you buy a home and plan to stay in it for less than 5 years, consider a shorter term mortgage or a portable mortgage. When you decide to sell your home before the mortgage term is up (typically 5 years) you will run into lender penalties.
Not all mortgage types are portable.
2. Equity take out
As home values increase and you build equity in your home, you may want to take out some of the available equity to pay off debt, to invest in rental property or renovate the home.
3. Relationship status change
It could be moving in together, where one of you sells her/his home because you -don’t want to keep both homes and pay two mortgages.
It could be a break-up when you both feel that selling the home is the best scenario.
It could be that you are about to expand your family and the cute one bedroom is no longer enough space.
Perhaps it could be buying out the other spouse.
4. Save money
Although it seems like the mortgage rates are on the upswing, sometime in the future they could go down again. If the mortgage interest rates fall and are lower than when you originally got your mortgage, you could be considering a change.
5. Pay the mortgage off before the maturity date
Well, this is every Canadian’s dream. To live mortgage free! Sometimes people gain access to funds to allow them to pay off their mortgage earlier than planned.
There are a few more scenarios such as removing a person from the title, selling your home due to health reasons, or any number of lifestyle changes. No matter the reason, talk with us to explore all your options and review the numbers.
Given the lender enforced penalties when you break a mortgage, you want to make sure that it is the best available financial solution. Our Shop Mortgages Team makes sure the penalty calculations, rates, portability, and other terms are reviewed before entering a mortgage contract.
Get in touch with us or call us at 519-250-4848 Address: 3345 Dougall Ave. Windsor, Ontario (across from McDonald’s).
