Why would I break my mortgage contract in the first place?
When going over your mortgage, you may realize that your needs and goals are no longer aligned with that of your current contract. Therefore, it may be time to reevaluate the details of it and speak with a professional mortgage advisor. Let’s say that after an in-depth discussion, you want to renegotiate your mortgage contract before the end of the term.
There are several reasons why your current mortgage contract may not suit your needs as well. For example, one reason can be that the interest rates have decreased and you wish to take advantage of that. Another reason can be a change in your financial situation.
Other situations to consider before breaking your mortgage contract include a change in your family situation, moving to a new place, and wanting to purchase a new property. Contacting your lender or a mortgage expert on what these changes can mean for your mortgage is a step in the right direction.
What is the cost of breaking my mortgage contract?
In order to determine the cost of breaking your mortgage contract, you must first identify your type of mortgage. Is it a closed one or an open one? For instance, if you have a closed mortgage, then breaking that contract can mean a prepayment penalty that can be costly.
Therefore, it’s always a good idea to look into the costs associated with breaking your contract. Be sure to speak with an experienced professional if you have any questions while going over the fine details.
Don’t forget to ask questions about, for example, appraisal fees, reinvestment costs, administration costs, as well as other penalties that may occur when you break the mortgage contract.
What about mortgage contract renegotiations?
If you have a discussion with your mortgage lender, then be sure to ask about other options with respect to your mortgage contract. Some lenders can extend the length of your mortgage prior to the end of the term, which can result in you not getting a prepayment penalty.
Such an option is known as the “blend-and-extend” one, since the result may be a mix of your new term’s interest rate and your old one. Note that administration costs may be involved in this option as well.
Additionally, don’t forget to ask your lender about the calculations required to figure out the updated interest rate. Doing so can further aid you when it comes to your long-term goals and current needs.