Breaking your mortgage can be an option if you need access to additional funds, or in any of the following scenarios:
- You’d like to renovate your space
- You would like to purchase another property, or would like to move
- Your financial situation has changed, or you want to increase cashflow
- Interest rates have changed and you want to renew your mortgage in anticipation of further rate changes
How do we help you determine if this is the best solution for you?
Although it depends on your particular situation and the reason for breaking your mortgage contract, here are some factors we consider:
Is your current mortgage an open or closed term?
A closed term mortgage is ‘closed’ to repayment (within the allotted prepayment allowances) and are generally at a lower interest rate.
An open term mortgage is ‘open’ to repayment in full with no limitations and are generally at a higher interest rate than closed term mortgages.
Are you in a variable or fixed rate mortgage?
Variable rate mortgages fluctuate based on changes to the Bank or Lender’s Prime Rate.
Fixed rate mortgages are locked in at the rate at the time of signing, and will not change throughout the term of the mortgage.
Did you have a cashback offer and is there a payback requirement?
Some Lenders or Banks will offer a cashback incentive at the time of signing – to help with the legal fees, the appraisal fees, or even just additional cash to help with expenses. These cashback offers usually come with a requirement to pay all or some of the funds back if you break your mortgage before the term is complete.
What are the penalties, if any?
Common penalty calculations are 3 months’ interest on the balance outstanding or the Interest Rate Differential (IRD), and can vary from lender to lender. We can help you determine which formula your lender will use and whether or not it will be advantageous to pay the penalty up front or to include it into your new mortgage. We’ll also conduct a cost-to-savings analysis to see if it makes financial sense to break the mortgage contract for a new mortgage term.
Are there additional costs and fees to discharge the mortgage?
Based on how your mortgage was registered against your home, and which Lender your mortgage is held with, there may be fees to move or discharge your mortgage registration.
Can you port your current mortgage to another property to avoid penalties?
Some Lenders will allow you to move (‘port’) your mortgage to another property. This means you can transfer your existing mortgage balance and/or rate to another property that you may be interested in purchasing – while avoiding penalties and possibly benefitting from an already reduced/lower interest rate.
Are there any early renewal options to change your contract to avoid a penalty?
Your mortgage may come with an option to early renew with the same Lender without a penalty. If the interest rates are currently lower than your existing rate, or forecasted to rise in the near future, you may want to ‘lock in’ today’s rate by renewing early.
There are many variables we consider when it comes to securing a mortgage and understanding the terms outlined above. We are happy to walk you through your options, and to help tailor a mortgage solution that is best suited to your needs. We understand that mortgages are not “one size fits all”. Our team has access to many different Lender options and a range of products to choose from.
Contact us to discuss your situation and how we can assist.