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Although anyone can choose to break their mortgage pre-maturity, a lot of homeowners aren’t aware of the penalties that you incur by doing so. It is easy to become so focused on the rate that the terms of the mortgage, which include the expensive penalties, are overlooked.

 

There are a number of reasons why a homeowner may break a mortgage before the term matures.

 

Unless you obtained a portable mortgage, moving within the next five years will require you to break your mortgage -- and not all mortgages are portable. Quite simply, ‘porting' your mortgage means moving it with you when you sell your home and move to a new one. This is more to avoid the penalty fees of than to obtain better rates.

 

In the last few years there has also been a significant increase in home values and homeowners have been taking out equity from their homes for other investments. Taking out that equity in your home requires refinancing, which breaks your current mortgage contract.

 

Paying off debt is another reason people break their mortgage, to consolidate other debts into the mortgage to pay a lower interest rate than a credit card or line of credit and have less payments per month.

 

A change in your relationship or family, such as a marriage, divorce, or a new baby can cause the need to break a mortgage early to be able to sell a property — or if one partner wants to buy out the other partner’s portion of the home, which requires refinancing. Major events such as illness, losing a job, or a death can also be reasons why a person has to sell a home and end their mortgage before term.

 

Finding lower interest rates than when you originally got your mortgage can make it tempting to break the current terms, but ensure you work with your mortgage broker to see if it’s worthwhile with whatever penalties you may have to pay.

 

If you have the ability to repay the mortgage in full, prior to the term completion date, keep in mind that usually only an open mortgage agreement will allow for an early repayment without penalty fees. You’ll need to weigh the cost of the remaining interest against any penalties that you could be charge for paying the mortgage in full ahead of time.

 

Some of these reasons are avoidable, while other are not. Because mortgages are complicated, it is always important to have a mortgage expert that you can trust and learn all the ins and outs of your mortgage before you sign, or renew.

 

 

 

If you have any questions, or are looking for a highly recommended mortgage expert, please feel free to call or email me anytime.

 

-Darin

 

 

 

Other useful links:

Mortgage Penalty Comparison

5 Top Questions to Ask Your Mortgage Lender

 

 

 

Sourced from blog article posted by Christos Gitersos

Original post by Kelly Hudson Dominion Lending Centres - Accredited Mortgage Professional

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