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When you are ready to sell your home and buy a new one, your first move should be to look into your mortgage options. If you need a bigger mortgage, your options will include bringing your mortgage with you if it is portable. You can often “blend” your current mortgage rate with the mortgage rate on the additional funds you need.
With interest rates today still hovering at historic lows, you might want to consider breaking your current mortgage and getting a new one for the total amount you need. To break your mortgage, your lender typically has the right to charge a penalty based on the greater of three months’ interest or the interest rate differential (IRD), which is essentially the difference between your old rate and current rates for your remaining term.
Lenders can calculate IRD differently; you should always get the actual penalty from your lender. If you are in a term longer than five years and you have passed the fifth year, the three-month penalty applies and not the IRD so this may make breaking your mortgage more appealing.
You’ll want to compare your new blend/extend rate with the rate you’d get with a new mortgage. Of course, the exact terms and conditions of your current mortgage need to be examined closely to determine if there are other factors to consider.
It’s worth a professional mortgage analysis to determine which option is the most beneficial to you. There’s no cost or obligation.
Our team stays up-to-date on current rates and all of the new opportunities available – from a wide range of lenders – so we can help you with all of your mortgage details for your next home.