PROUDLY CANADIAN
When expertise is needed
We all experience occasions in our lives when things happen and we need some experience and advice to help sort them out! If for one reason or another, you are in the position of needing or wanting to break your mortgage agreement, then it’s time to tread with care and seek some expert professional advice. The questions you will need to ask your qualified mortgage broker will probably lead to the issue of a mortgage penalty!
This is a particular area of importance which in the majority of cases needs to be directed towards your present lender and a payout amount requested. How the penalty for breaking a mortgage term is calculated is determined by subtle differences by various lenders. Therefore, you must be fully aware of exactly what your penalty will be to enable an informed decision to be considered and made.
Mortgage penalty calculations
It is usual for two types of mortgage penalties to consider when breaking a mortgage: these are referred to as an Interest Rate Differential (IRD) and a 3-months interest. If your mortgage term is based on a fixed rate then you will face the greater sum provided by the two. On the other hand, should you be linked to a variable rate mortgage then you should be penalized with the lesser 3-months interest payment.
Alternatively, you could have what is known as a “portable mortgage” which allows the transferring of your existing mortgage and rate to another property you are considering purchasing. When discussing the various options with your mortgage broker they can give you confirmation regarding whether this particular option will result in you not being required to pay any form of mortgage penalty.
Impacting clauses
Another reason to seek the professional advice of an experienced mortgage broker relates to any clauses that have been inserted in your current mortgage and which could affect the options available to you. Examples of this are a Bona-fide Sales Clause that prevents you paying off your mortgage during the agreed term unless you sell the property. Then there is what is known as the “No Port Option” which means if you sell, you cannot transfer the existing mortgage to another property during the stated term.
There are various other issues to consider, if you for any reason, want to pay off your home prior to the end of the mortgage term. They are crucial reasons for seeking the expert help of an experienced mortgage broker who will advise and guide you in the right financial direction!