As a homeowner, you need to know how to make sound financial decisions and this is also important when it comes to your mortgage. If you are considering breaking your mortgage, it’s always a good decision to consult a mortgage broker for help and guidance on the issue. You need to know what the costs, as well as the possible benefits, will be so that you can make the right decision and ensure that your credit rating also stays intact.
The costs involved
You may remember that you’ve received lower rates when you first applied for your mortgage. Unfortunately, there are always costs and penalties included, especially when you choose to end your mortgage early. The main reason for this is that banks and other financial institutions know that close to 80% of Canadians break their mortgage before its term.
When banks add these penalties, they ensure that they profit in some way, when they offer you a lower mortgage rate in the beginning. This is why working with a mortgage broker is so beneficial as they will calculate what fees and penalties might be applicable when you break your mortgage. In some cases, it can actually be more expensive to refinance your mortgage.
Reasons to end your mortgage early
There are various reasons why people choose to end their mortgage before its term. One of the main reasons is to access a better mortgage product or to access the increased equity in their house so that they can consolidate their debt, or purchase another property.
People often choose to access the equity in the mortgage to buy expensive items, do home renovations, pay for education or even buying a second home. This is often the main reason why people choose to end their mortgage early.
What to consider
When you want to end your mortgage before its term, there are a few things that you should consider. Your mortgage broker can help you work out possible penalties and fees that may apply, and this will help you to determine whether or not ending the mortgage is a good idea. It also depends on what you want to do, for example, if you want to take out a consolidation loan to settle a debt with a very high-interest rate, it may be beneficial for you to do so. It all depends on your current mortgage terms, as well as what you plan to do after ending it.
You may also want to refinance your mortgage, which may initially seem like a good idea with lower interest rates, but you need to look at the complete picture and decide whether or not it’s a good financial decision to make.
If you are considering ending your mortgage early, speak to Mortgage Guys. We are experienced mortgage brokers and can help you work out whether or not ending your mortgage may be a good idea, as well as present you with the different options available.