Financial institutions sometimes charge tens of thousands of dollars in penalties to borrowers who want to interrupt their mortgage. Here are 5 tips to avoid or reduce expenses:
1. Take the double action with partial repayments
Several mortgages make it possible to repay 15 or 20% of the borrowed amount each year. Sometimes, early repayment must be made on the anniversary date of the signature. Sometimes, customers can make the annual refund at the time of their choice. If the anniversary date is approaching, two early repayments can be made in advance to use the two-year repayment privilege. After handing over 40% of the loan, you can then terminate the mortgage. You’ll have saved almost half of the penalty. It’s thousands of dollars!
2. Move with your mortgage
If you are moving or relocating, you can put your mortgage in your suitcases. Some lenders accept others do not. It’s negotiating directly with the lender.
3. Transfer the mortgage to the new owner
If the buyer of your home agrees, you can shift the mortgage to him, as long as your financial institution agrees. There will be no penalty since the new owner will observe the same terms and conditions, until the end of the loan. It’s a great way to escape the penalty while saving on notary and other fees. The catch is that we remain legally responsible for the loan,
4. Ask for a weighted rate
In the fear that interest rates are rising, you would like to renew your mortgage sooner than expected? By discussing with your lender, you can get a new mortgage with a weighted rate. Institutions do not offer all this early renewal option, and each institution has its way of calculating.
Let’s say 12 months are remaining on a 5-year mortgage that costs 6% interest. You could renew the loan immediately for a further period of 5 years. The bank will make you a weighted rate of 4.4% (1 year to 6%, 4 years to 4%).
5. Freeze your new rate in advance
If the maturity of your mortgage approaches, you can also shop in advance for the renewal of your loan, to protect yourself against a possible rise in interest rates. Lenders agree to “freeze” a rate three or four months in advance.