There can be a time when you would want to break your mortgage before the actual 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 on penalty calculations. However, the method differs from one lender to another. Most penalties are 3 months long, but it is not the case if you are in a fixed-rate mortgage.
The penalty is a crucial decision. However, there are a few reasons as to 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 5 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.
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 or invest in another rental property or end up renovating 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.
Mortgage rates are not always on the upswing, as no one has ever seen the future it may go down again. If you find yourself in a similar situation, your mortgage interest rates fall, and hence 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 advice from the experts regarding penalty calculations, rates, portability, and other reviewed terms before entering a mortgage contract. After all, everyone needs the best financial solutions for themselves.