For most home buyers shopping for a mortgage, interest rate is the most important aspect of the process. However, it’s important to look past mortgage rates and also consider penalty rates. While no one plans to break their mortgage, there are many reasons you may have to in the future and it’s smart to plan for all possibilities.
Unforeseeable circumstances such as divorce, a move, a change in
finance, or other personal circumstances may mean that you can’t
complete your mortgage term. It’s important to plan for the possibility
that you may not be able to see your term through right from the
beginning, or you may get hit with a huge penalty. When discussing your
mortgage, either with a bank or mortgage broker firm, make sure you ask about the process of breaking a mortgage, and the penalties involved.
Mortgage penalty is calculated using the interest rate differential.
Typically, the penalty is calculated by taking the greater of three
months interest on the remaining balance, or the interest for the
remainder of the term on the remaining balance. There’s little point in
trying to save a couple dollars a month on a low interest rate, if you
end up getting hit with thousands in penalty rates for having to break
your mortgage. Looking ahead to all possibilities can help you be
prepared in the face of unexpected costs, and avoid any nasty surprises.
Something to consider as well when it comes to mortgage penalties is
the difference between a fixed and variable rate mortgage. Fixed rate
mortgages tend to have higher penalties than variable rate mortgages.
It’s worth visiting a mortgage broker firm and discussing these options,
as it can be overwhelming to research it all on your own.
When searching for lower penalty rates, it’s all about the lender.
Smaller mortgage broker firms tend to offer better penalty rates than
the larger ones, or banks. Even though it may be the last thing on your
mind when shopping for a mortgage, planning ahead for the possibility of
breaking your mortgage can save you thousands of dollars.
At Northwood Mortgage, our mortgage professionals
work hard to find you the lowest and best mortgages rates and terms.
Mortgage shopping can be difficult, especially for the first-time home
buyers, and there are so many factors to consider. Our mortgage experts
can help you navigate the tricky world of mortgage shopping, and find
you the best mortgage for your needs. Contact us today to set up a meeting.
source: northwoodmortgage.com