Buying a New Home: Capital Mortgages Ottawa

Should you break your mortgage?

Currently, mortgage rates are at rock bottom. With many lenders at under 3% and some charging much lower, this is the lowest they have ever been in years.

If you happen to be stuck into a mortgage that charges considerably higher rates, you might want to break your mortgage in order that you may take advantage of these low rates. However, breaking a mortgage is never easy.

Before you decide to break your mortgage contract, there are important questions that you need to ask yourself.  Let the team at Capital Mortgages assist you in navigating these questions to help you make the best decision.

How much does it cost to break your mortgage?

According to mortgage experts, the first thing that you need to consider before you decide to break your mortgage is the penalty that breaking your mortgage will attract.

This is in turn affected by the kind of mortgage you have. The penalty varies from one lender to the next. Generally, lenders have very complicated methods of calculating this penalty. For this reason, it is often difficult to know the amount of money that you are likely to be charged. You may only get to know of the penalty after taking the mortgage.
Further, experts warn that if you had received a discount in the interest rate on an existing mortgage, it will be included into the calculation.

Make sure you have read your mortgage’s fine print.

In most cases, lending institutions calculate interest rate differential based on the remaining years of your term. Thus, if you have paid three years from a 5-year term, the lender will base their rate differential on 2 years which is the number of years remaining for you to complete the mortgage repayment.

But in the wake of some institutions offering very low rates, banks and other lenders introduced new rules to the way they calculate interest rate differential. Instead of basing it on the remainder of your term, they will calculate it on the full mortgage term. It does not matter where you have reached with payment. Therefore, it is extremely important that you read the fine print. Read both your current mortgage’s fine print as well as that of the mortgage that you want to take.

Benefits of breaking your mortgage

Breaking your mortgage helps you take advantage of the current fixed lending rates. If banks are charging less than 3%, why should you pay any higher? Another thing is that it saves you money. Instead of waiting for the remainder of your lending period, you can get out of the mortgage contract and enjoy low interest rates. You also get to finish your mortgage faster.