The most common situations for mortgage penalties
(Note: This article is part of a series of articles on the subject of mortgage penalties. It may be that your question on penalties may be better answered in another article. The list of the other articles on penalties can be found at the end of this article.)
There are penalties that are charged by lenders on loans that are paid off earlier than maturity. There are some cases where these types of penalties can be avoided. Of course, there are also situations where these charges cannot be avoided at all.
The sale of your home: If you sell your home, it does not have to necessarily mean that you have to break the contract on your home loan and pay prepayment penalties. For example, you can find out if your mortgage is portable and you can carry it to your new home. If you are not buying a new home, or if you are moving out of the country, you will most likelyhave to pay the penalty. But don’t give up; read our article How to lower or avoid a penalty? to see if you are able to save any money.
Refinancing for debt consolidation
Refinancing your mortgage for the purpose of debt consolidation is often a very good idea. It can helpyou to get back on your feet, financially. Sometimes, it is better to take out a second mortgage, especially when there is not a very long time remaining before you have to renew your mortgage. It is better to contact a mortgage consultant who can calculate the best solution for you: take out a second mortgage, or simply refinance immediately and pay the penalty.
Refinancing for renovations:
Usually when you do renovations, you will need additional funds in order to have the work done. If you are considering renovating, here are three ideas that may help you save money overall:
Some kinds of work are considered urgent and should be done immediately. When this is the case, you should check if you can choose the option of financing the renovation with a personal loan or a line of credit loan. When you renew your mortgage, you can include the renovations in that refinancing package, and pay off the other loan.
If you want to remodel your home, either to sell it, or so that you can get a higher price for it, you should think about an open mortgage to finance these types of renovations. With this type of mortgage, you will not have to apply for a second mortgage, or incur prepayment penalties.
If you plan on purchasing a property that needs to be renovated, you can probably put together a plan to have the renovation financing included in your mortgage. There is a special mortgage called the “renovation loan option” that is made for these situations. You borrow money now for renovations you plan once you take possession of the house.
Marriage separation: When married couples separate, it often happens that one of the partners will buy out half of the home from the other. When this occurs, many banks will allow the new mortgagee to have a balance transfer rate for any additional funds
This is not always possible; the income of the partner taking over the mortgage may not be sufficient to obtain a new mortgage. If you are encountering such a problem, please contact our office to see if you can avail yourself of a specialized product called a self declared revenue loan to obtain the mortgage.
You may still have a penalty for breaking the loan contract, but you will still have your home.
When a will is executed: In the case of death of the owner of a home, the property often has to be sold in order to meet the requirements of the will. Some lenders will waive the early payment penalty fee in such cases. You just have to study and find out for yourself.
Carefully consider your options
Before making any decision that will lead to a penalty, discuss your situation with an accredited mortgage counselor (CHA) to learn whether there is not another solution.
It is, after all, thousands of dollars we are discussing; it is well worth your trouble to find out. About
The Author...
Gregory is an Accredited Mortgage Professional (AMP). To get more information on mortgage rates - taux hypothèque, please visit: Hypothèques - Mortgage Intelligence
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