Do you need to break your mortgage?

It’s best to refinance your mortgage when your term is up for renewal, but Mortgage Breaking is becoming relatively common during the Covid-19 pandemic, so it’s important we discuss mortgage penalties.

“Clients break mortgages for a number of reasons,” Roy Cocciollo says in this video:

“You might need to break your mortgage because you’re moving, getting married, divorced, changing jobs, health issues, or the desire to leverage capital from the property. 6 out of 10 Canadians will break their current mortgage at an average of 38 months. This means that 60% of people are refinancing or restructuring their mortgage for some reason and they’re triggering a penalty!”

News headlines during Covid-19 highlight worry about job losses, defaults, and lost income, but we are seeing another reason for breaking a mortgage – Home Upgrades. We see transitions to work-from-home and our clients want to break their mortgage on their downtown condo to move to a house in the suburbs with outdoor space and a room for a home office.

Another recent news article about mortgage penalties during Covid-19 sparked lots of conversation on social media, but this issue is not new!  It’s our job to explain the differences between fixed and variable rate mortgages. We want to make sure our clients see themselves living in the house for the term of their mortgage, if not, we need to work on options.

Watch our video on how Big Bank Mortgage Penalties work:

“The key take-away is that variable-rate mortgages have a guaranteed prepayment penalty of only three months’ interest, compared to the potentially much higher fixed-rate penalties using a complicated interest rate differential calculation.”, Roy Cocciollo.

You might see news articles warning that “prime rate almost always climbs after a recession”, however, another point in favour of choosing a variable-rate mortgage is that interest rates cannot increase randomly. There are eight pre-scheduled Bank of Canada meetings every year to decide whether to move the Prime lending rate or not. The interest rate will not double overnight. In fact, the interest rate is unlikely to move by more than .25% following any given meeting. So…the fear of rate hikes should not drive your decision to lock into a Fixed Rate.

YourMortgageYourWay.ca will help you save thousands on your mortgage by matching you with the right mortgage lender for your needs. Our promise is to use simple language, full transparency, and clear communication every step of the way.

Are you thinking about getting a lower interest rate and worried because you’re in a fixed-rate mortgage? Don’t be afraid of your penalty, we have a solution.

Give us a call now and let’s do a mortgage review. Cashback mortgages can help you get up to 3% of your mortgage balance back to you. You can use this cash to cover expenses like your legal fees, moving costs, investments, or even pay back your mortgage with a lump sum. Or better yet, pay your penalty and get a lower rate on your mortgage.