PROUDLY CANADIAN
Taking the right path
Whatever the reason for you wishing to break your present mortgage term, there will be a penalty to pay. In the majority of cases, the first step in the process is usually to contact your lender and request a payout amount. Alternatively, you can take what may be considered the wiser path and have a friendly discussion with a qualified mortgage specialist!
There is a multitude of reasons for taking this path, but primarily it relates to you getting the best possible financial advantage, now and in the long term. Another factor is that the financial implications for many of us can seem complicated especially with each lender having their own and subtle methods of calculating a mortgage penalty. In this respect, you need a professional mortgage specialist to act on your behalf and determine precisely what your penalty will be. Otherwise, how can you make a reasonable and informed decision?
The mortgage penalties
For you, the primary issues revolve around a “how” issue. How, will the mortgage penalty be calculated and how much is it going to cost you?
Basically, there are two types of mortgage penalties imposed on a borrower for breaking a mortgage agreement. One is the Interest Rate Differential (IRD) and a 3-months interest. If you’re linked to a fixed rate mortgage, you’ll probably be confronted by the greater amount of the two. Whereas, a variable rate mortgage will mean payment of only the 3-months penalty interest payment, generally the lesser amount. In any event, your mortgage professional will explain, advise and guide you through the procedure.
Portable mortgages and the rates factor
The portable type of mortgage is not exactly as it literally sounds; it’s a mortgage that is in effect permits you to transfer your existing mortgage and its attached rate to another property if you are considering buying one! Your mortgage broker will explain to you why this option is a particularly good one and furthermore, how it will help you not to pay any mortgage penalties when moving.
Another issue for your mortgage advisor is that obtaining a lower mortgage rate does not mean automatic savings. One of the qualified Mortgage Guys will calculate your savings compared to a mortgage penalty and explain why it is or is not, the right path to take! This is a decision-making situation where you need some experienced and qualified advice, from the experts.