We never know where life will take us and although we do our best to plan out our lives, we often get it wrong. What happens if you thought you were going to live in your home for the next 5 years, but a year later you accepted a job offer in a different province? What happens if you need to break your mortgage for another reason, is that even possible? Here are a few more reasons you might need to do this:
- Need a bigger home (sell your existing home)
- Change ownership of your home (title refinance)
- Try to get a better rate
- Consolidate your debts
- Equity take out
- Payoff your mortgage
More often than not, you may come across one reason or another to break your mortgage for the reasons noted above or perhaps others. Luckily most mortgages do allow you to break your mortgage but there are some things you should consider before venturing down this path. Here are some things to consider:
- Is your mortgage Open vs Closed?
- Open mortgages have no penalties and Closed mortgages do have penalties
- How are you breaking your mortgage?
- Some mortgages have a “bonafide sales” clause which only allows for the repayment of the mortgage in the case of a sale. In other words, if you are trying to refinance, this may not be possible under the terms of your mortgage
- How much are the potential penalties?
- What are the legal fees?
- Are there any other costs or restrictions
Because your mortgage may have specific terms and conditions, it’s always best to get in contact with your existing mortgage lender (mortgagee) to inform them of your intentions and to learn about any potential consequences of breaking your mortgage. It is also advisable to read through your original mortgage commitment to refresh your understanding of what it would mean to break your mortgage.
Once you have all of your facts, you would then decide if you still intended to proceed with breaking your mortgage to achieve a higher purpose/goal. In other words, is it still worth it for you, does it make sense? Sometimes you may want to switch mortgage lenders because the rates across the street are better than what you currently have but once you learn that it is going to cost you $5,000.00 (just an example), all of a sudden any savings you would get from the better rate, are wiped off the table when you tally up everything…
If you would like to learn more about this topic or would like to discuss your situation specifically, give us a shout at 905.455.5006