Does it Pay to Break Your Mortgage?
When considering whether refinancing or breaking your mortgage makes sense for you, you should always find a mortgage advisor who will analyze your situation, review your current mortgage and outline all the costs and benefits. By accessing specialized lenders with highly competitive rates, terms and conditions, a professional mortgage advisor will help you come out ahead on your if you go through with breaking your mortgage.
Remember that really cheap rate you got when you first got your mortgage from your bank? Well it came with hidden fees and penalties. Why? Well, because your bank knows that almost 80% of Canadians break their mortgage before the end of their mortgage term. Adding these penalties allows the banks to ensure that they can profit from offering you that “discounted mortgage rate” in the first place….remember, they are looking after their bottom line NOT YOUR bottom line. Your MonsterMortgage.ca mortgage advisor can help calculate a) how much it will cost to break your mortgage and b) whether it is worth it for you to do so. If you’re not careful, refinancing could actually end up costing more than it saves!
Why Would You Break Your Mortgage
There are various reasons why 80% of Canadians break their mortgage before the end of their mortgage term. The two main reasons – to save money by accessing better mortgage products and rates or to access increased equity in their home so that they can:
• Eliminate and/or consolidate bad debts (e.g., credit card debts)
• Purchase an investment property
• Pay for big ticket items such as home renovations or post-secondary education
Breaking Your Mortgage Next Steps
To explore whether it pays to break your mortgage call us today. MonsterMortgage.ca will:
• Conduct a FREE ANALYSIS of your mortgage to see how much equity is available in your home.
• Examine the fine print on your mortgage contract to determine if any early pay-out fees and penalties apply.
• Complete the necessary calculations and present a plan that shows what your bottom line benefit is.
• Enter you for a chance to WIN A FREE MORTGAGE PAYMENT
In many cases, debt consolidation not only reduces interest costs, it can also help put you back on the road to achieving your financial goals.
Here are some final thoughts to consider before you call us to determine whether it pays to break your mortgage.
Typically there are a few rules-of-thumb you should follow when calculating whether it is worth it to you to break your mortgage:
1. If you pay the penalty up front, then you want to determine if the interest you are saving over the remaining term is greater than the cost of the penalty;
2. If you add the penalty to the new mortgage, then you want to make sure your mortgage principal is the same or less at the end of the remaining term;
3. If you can blend the penalty into the new mortgage rate and the blended rate is lower than your current rate, then you are typically better off;
4. If you are in a term longer than 5 years and you have passed the fifth year, the three month penalty applies and not the IRD, this is Canadian law.
The exact terms on your mortgage may dictate whether there is value in breaking your mortgage. It is often worth taking the time to contact a qualified mortgage agent in order to have an analysis done on your unique mortgage situation.