To break a mortgage contract, you’ll need to renegotiate with your lender. This is also known as breaking your mortgage contract.
You may want to break your mortgage contract under the following circumstances:
- Interest rates decreased.
- Changes in your financial situation.
- Planning on moving and purchasing a new home.
- Changes in a family situation.
The cost to break your mortgage contract is impacted by whether your mortgage is open or closed. An open mortgage enables you to break the contract without paying a prepayment penalty. However, if you have an existing fixed-rate loan, which has already been paid off in full, then breaking the contract could mean paying fees for re-appraisal, administration, and reinvestment costs. This will depend on how much time is left on the original term of your loan, as well as where interest rates are heading at the time of breaking your mortgage.
It’s important to understand that you may have to pay a prepayment penalty if you decide to break your mortgage contract. A prepayment penalty is a fee charged by the lender for paying off your loan before its maturity date.
Other cost associated with breaking your mortgage contract includes:
- Administration fees.
- Appraisal fees.
- Reinvestment fees.
- A charge on your current mortgage and register a new one, also known as the mortgage discharge fee.
But don’t rush into anything. Many complex factors affect the cost, and deciding whether it is worthwhile to break your mortgage contract will depend on your specific situation. Weighing the positives and negatives and consulting a financial specialist will help you make an informed decision regarding your mortgage. It’s not easy to break a mortgage contract, but we can help you with the right strategy and help you plan for your financial future.