There can be a time when you would want to break your mortgage before the term ends. This situation is prevalent and occurs most of the time.
However, breaking the mortgage before the actual term with your current lender can cost you many penalties, which are also very expensive. Lenders save themselves from the loss by creating a formula for penalty calculations. However, the method differs from one lender to another. Most penalties are three months long, but it is not the case if you are on a fixed-rate mortgage.
The penalty is a crucial decision. However, there are a few reasons why people tend to break their mortgage before time.
HOME SALE AND PURCHASE OF A NEW HOME
It is believed that when you buy a new house, you plan to stay there for less than five years; hence, it is wise to go for a shorter-term mortgage or a portable mortgage. In case you are to sell your house before the mortgage term, you will face penalties. But always remember that not every mortgage is a portable mortgage.
EQUITY
Once you have made the purchase, your house’s value increases, and capital is built; once that is established, you may want to take out some and clear your debts, vest in another rental property, or renovate the house.
RELATIONSHIP STATUS CHANGE
You may get married, or you may move in with your partner. In such situations, you wouldn’t want to keep both homes and pay two mortgages as it will turn expensive. Hence, selling the house may seem like the next best option. Also, you can become a parent, and that one cute-sized bedroom is no longer enough. So hence, maybe buying another house for your family seems like a good idea for you.
SAVE MONEY
Mortgage rates are not always on the upswing, as no one has ever seen the future. It may go down again. If you are in a similar situation, your mortgage interest rates fall so that you may consider a change.
PAY THE MORTGAGE OFF BEFORE THE MATURITY DATE
Another reason to break a mortgage is to live mortgage-free! There can be times when people get access to significant funds; this helps them clear their mortgage far earlier than planned.
However, not only this, there are several other reasons for you to break your mortgages, such as removing a person from the title, selling your home due to health reasons, or any number of lifestyle changes.
It is sensible to seek the help of a professional before breaking your mortgage. Weigh the pros and cons and then break the mortgage. However, always request expert advice regarding penalty calculations, rates, portability, and other reviewed terms before entering a mortgage contract. After all, everyone needs the best financial solutions for themselves.
