This is the last post in my 4 part blog series about mortgage penalties. Today we will look at a couple ways to reduce the mortgage penalty.
In an effort to save money before breaking your mortgage you should try to maximize any pre-payment privileges you have. Most mortgage lenders will allow 10-20% of the original principal mortgage balance to be paid in any given year.
If you haven’t maximized your pre-payment and you have the resources to do so before paying out your mortgage it would reduce your penalty.
Some mortgage companies have caught onto this trend and have mandated pre-payments cant happen within 90days of paying out the mortgage in full.
If you are simply moving homes, you may consider porting your mortgage, in other words, moving your mortgage to the new property. The mortgage would stay with the same lender, who would increase or decrease the mortgage amount depending on the new home purchase price and the mortgage required.
They would also blend the rate, essentially rolling in the penalty and you would receive a rate somewhere in between your old rate and the current mortgage rate.
Regardless of which path you choose when breaking a mortgage it is important to make several calculations to determine the short and long term effects of paying out or porting your mortgage.
Sometimes the lenders true colours will appear in this process and you will be disappointed with their unwillingness to work with you as a valued client. I always suggest that clients consider this when making their final decision to break a mortgage and switch to a new lender.