When you apply for a mortgage, oftentimes they come with various terms and conditions around penalties. Most penalties are always for breaking a mortgage before the term. And, even with penalties, 60% of people often break a mortgage early. A lot of mortgage holders are unaware of how steep penalties can sometimes be, and only focus on the overall interest rate they are getting. Working with a broker can help ensure you have the full picture of your mortgage terms before signing. You can choose from a wide variety of mortgage products. You can readily avoid paying harsh penalties for ending a mortgage preterm by following the following nine reasons why people end term early.

You’re Moving Homes

You don’t often have the luxury to move when you choose. Perhaps your family is suddenly growing and you need new space, or there’s too much maintenance in your older home and you wish to have a new build. It can be hard to predict if you are going to move before your mortgage term is due. And, if you do move before your mortgage is up, you can end up with those harsh penalties. 

A way to help combat this is to apply for a portable mortgage. This mortgage allows you to just move the mortgage to your new home, without the penalties (though you will need to requalify for a ported mortgage). If you know you will move before your mortgage term is up, going with a portable mortgage is a great choice.

You Wish to Take Out Equity

With the rise of home values in Canada over the last few years, many people are taking advantage of this by taking out home equity loans. This can be then used for investments, buying another property, or tackling a renovation.

Get Rid of Debt

If you have issues with debt, one solution many people do is to roll the debts into your mortgage to benefit from lower interest rates and longer payment terms. This is known as a Debt Consolidation Mortgage. It helps streamline your finances into only one loan repayment plan, instead of multiple.

Moving in With Your Partner

Many times when partners decide to move in with each other, they end up with two owned properties. It’s more likely than not that one of you will end up needing to sell your original home.

Divorce or Break-Up

If you live with a spouse or partner and then divorce or break up, it changes the mortgage on the home. Either one partner will buy out the other (and refinance a mortgage) or the equity is split between both parties.

Life Changes

Life happens. Major illness, sudden unemployment, death, or other major changes to your situation can result in sudden refinancing or the sale of the home.

Removing Title

If you had help buying your home from mom and dad, they may be on your deed of title. If, down the road, when you are more financially sound and your parents want to be removed from the title you can either be faced with fees or breaking a mortgage (depending on individual lender protocols).

Get Lower Rates

A common reason to break a mortgage is when rates fall. You want to piggyback on more favourable terms and save money. Work with a broker to see if breaking a mortgage just to save on interest rates will actually benefit you, or result in harsh penalties.

Paying it Off Entirely

If you are able to gather the funds to fully pay off your mortgage (lotto win, inheritance, salary raises), then you may want to pay it off before maturity. Of course, with the right terms and rates you should be able to pay it off within the typical span of 5 years without paying penalties.

Many of these reasons are spontaneous and unexpected, which makes them hard to account for when mortgage shopping. But, working with an expert mortgage broker can help you navigate the various products available, the detailed terms, penalties, and information you need to know beforehand. And, if life does throw you a loop, working with a mortgage broker can help you get through those challenges as easily as possible.