Does it make sense to break your mortgage for a better rate?
This is a question on a lot of individuals minds with the current financial fall-out from Covid-19. One thing you need to remember if you are considering breaking your current mortgage is you will likely have to pay a penalty. The penalty amount all depends on what type of mortgage you currently hold and what institution you are with. If you find yourself in this situation a Mortgage Analysis could help you.
Why do I have to pay a penalty?
A pre-payment penalty protects your lender who was counting on interest payments from you for a specified period. When you pay your mortgage off quickly, your lender is getting less than they anticipated in interest payments and you will pay a price for changing or opting out of your contract.
How is my penalty calculated?
If you have a variable rate mortgage, you will have to pay a three-month interest penalty.
If you have a fixed rate mortgage, you will have to calculate three months of interest and also calculate the interest rate differential and pay the greater of the two options. The interest rate differential is calculated as the difference between the existing rate and the rate of the item remaining, multiplied by the principle outstanding and the balance of the term.
Why you should contact Client First Mortgage Solutions
If you are considering a better mortgage rate, contacting a Mortgage Advisor at Client First Mortgage Solutions should be your next step. They can help you decide if it makes sense to break your mortgage to save you money. A Client First Mortgage Solutions Mortgage Advisor can complete a free Mortgage Analysis and show you if the penalty you pay is less than the gain you will achieve or that it is simply not worth it.
Original Article – CTV News