With a low mortgage rate environment, breaking your existing mortgage could save you money in the long-term. In most cases, you will need to pay a penalty fee to exit out of your locked-in mortgage commitment, but if it calculates to be way less than the benefits of the new one, it can be well worth it. If you’re interested to find out more, read on, as we outline when and why you should transfer transfer to a better mortgage.
Lower Market Interest Rates
If you’re locked into a fixed mortgage and the current rates have dropped, this would be a perfect opportunity to talk to a mortgage advisor about the potential for breaking your existing mortgage. Another example is when you have a variable rate mortgage and it’s forecasted for the interest rates to start rising over the next year to two years. It may save you money down the road if you break the mortgage rate now, and lock in at a fixed lower rate.
Struggling With Monthly Payments
Those who are also struggling with high monthly mortgages may wish to break their current mortgage and find one with a longer amortization period, for example from 25 years to 35 years. This would make the payments lower for a longer period of time.
Why Break Free
Figuring out if it’s worth breaking your mortgage and capturing a lower rate comes down to the math. Figuring out what the penalty can be a complex process, and there may also be extra fees, so having a mortgage advisor can be most helpful. An advisor will be able to calculate the expected penalty costs, any other potential fees that may apply, and compare the overall cost savings with taking on a new rate. A new mortgage could end up saving you thousands in interest payments over the life of your mortgage. With the money you save, you could have enough to help you afford a new renovation project for your home, take a few nice vacations, pay back your mortgage faster, or even put the extra funds into investments or a down payment on a second home .
With the low mortgage rate environment currently in Canada, you could save lots of money by breaking your current mortgage and entering into a brand new one.
To find out if breaking your mortgage is the right thing for you and your financial situation, contact us to help you get started.