A day may come when you may face a situation wherein you have to break your mortgage, even before the term is over. And when such a situation arises you must know there are penalties involved. So when do people usually break their mortgages, and what does it involve?
When Looking For A Lower Interest Rate
It may happen that the rate of interest of a mortgage was higher when you bought your home and that it is lower currently. In order to save up a considerable sum, you may want to crunch numbers with the help of your mortgage broker and then decide if you want to break the mortgage, pay a penalty, and still come out of the whole deal saving something.
Sale or purchase of a new home
When you are buying or selling your home you may consider breaking your mortgage. In case you are buying a home and there are chances you will stay there for a period of less than 5 years, a short term mortgage is worth considering. But when you are selling your home lender penalties do crop up.
Equity Take Out
Over the years as the value of the home increases, people feel the need to take some of the equity out and use it towards paying off their debts or renovating their homes or even investing in elsewhere. Equity takeouts can be costly, especially when you are doing it mid-term.
Changes in a relationship
Whenever there is a change in the relationship status such as one of the partners in a relationship sells his or her home, in order to avoid paying the mortgages twice, or in the case of a couple moving in, they decide to break a mortgage. It could also be when a relationship falls apart that a couple sells their home for which they were paying a mortgage together. Mortgages are also broken in case of an expansion of the family home for want of a bigger space. The scenarios could be many. All will mean you have to pay a penalty for breaking the mortgage.
To Live Mortgage free
It is the ideal scenario for anyone currently paying a mortgage or mortgages to be free of it. If by good luck and hard work, you are able to pay off the entire sum of your mortgage amount, then you will definitely need to break the mortgage, and do a little happy dance about it even if you have to pay a penalty.
It is to be noted that the penalties for breaking a mortgage charged by the major banks is usually much higher than what is charged by other lenders. Most home owners try to get a better rate forgetting about the finer terms of the contract, which need to be read, assessed, and taken into consideration while taking a mortgage.
Mortgages and everything related to them can be a tad daunting as there are a number of aspects involved before you make a decision. It is best to take the help of an expert while doing so. We are happy to help!