A surprising 60% of mortgage holders break their mortgage during the term. When a mortgage contract is broken a lender typically will charge a penalty. There are many reasons why someone may need to break a mortgage. This post reviews the most common reasons people break their mortgage.
Many mortgage shoppers focus on the term of the mortgage, such as wanting a 5 year fixed term. However, this term may not be the best option for everyone.
There are many mortgage terms available from 6 months to 10 years. By knowing the reasons why others break a mortgage, it can better guide you to find the best mortgage term for your needs.
Why people break a mortgage:
Paying the mortgage in full before the term is finished:
When receiving an inheritance, bonus, or payout of any kind during the term that will payout the mortgage or substantially reduce it.
Seeking a new mortgage with a lower rate:
This can be done with your existing lender or with a new lender. For example, if you have a variable at prime – 0.5% and now prime – 1% is available. Or if you have a fixed rate of 3.99% and now 3.69% is available, for example. If interested to know the best mortgage rates in Ottawa, contact an Ottawa mortgage broker today.
Changing the names on the title of the mortgage:
Typically you can add or remove names on title with a legal and administrative fee however if the lender does not allow this to be done during the term, then one would need to break the mortgage and with that, possibly face a penalty.
Health complications, accident, etc.:
If a disruption in health occurs that affects your income, this may cause difficulties in making the mortgage payment. Especially if adequate insurance is not in place.
Break down in a relationship:
Unfortunately separation and divorces are becoming more and more common and this may create a need to break a mortgage.
Getting married or meeting someone new:
When two people that have separate homes and mortgages move in together and only one home is needed now, one of the two may need to break their mortgage. The other person can look to port their mortgage, if possible, to the new joint house or just keep the mortgage as is if the other person moves in with them.
Some lenders will allow you to increase your mortgage during the term with a refinance however many do not allow this, or have less favourable terms that are offered when refinancing which may create the need to want to break your mortgage.
Selling the home:
If selling your home and not buying another home to port the mortgage to.
Contact me today to learn more about the most common reasons people break a mortgage