Can I Get Out Of My Mortgage Without A Penalty?

There are many reasons you may need to break a mortgage. Life is unpredictable, and perhaps a five year closed mortgage seemed like the right choice at the time, but as we all know circumstances can change. Maybe you need to sell earlier than you thought, or maybe you found a cheaper rate somewhere else. Unfortunately, getting out of a closed mortgage can result in paying a penalty fee, and these can cost thousands, or even tens of thousands of dollars.

Protect Yourself From The Beginning

When it comes to signing a mortgage, the language that’s used in the documents can be complicated and difficult to understand, especially for an inexperienced buyer. In this way, you can get stuck paying penalties larger than you expected, or not being able to get out of the mortgage at all.

Though it can seem daunting, it’s worth learning how to read legal documents. When it comes to your mortgage, or anything involving substantial amounts of money, it’s imperative that you know exactly what you’re agreeing to. Even if you use a lawyer to go over these documents with you, don’t completely let them take the reins. You should understand every detail of what you’re signing, and you should be able to use these details to foresee any future issues.

It’s useful to calculate mortgage penalties before you find yourself in a position where you have to get out of your mortgage. The more prepared you can be, the better.

How Do I Calculate Penalties?

There are online penalty calculators available, but it is recommended that you calculate the penalty yourself so you know what you should be paying.

There are two methods you can use to calculate what you will be paying, but whichever of the two is higher is the one you should be prepared to pay.

• Three Months’ Interest: Your next three mortgage payments plus interest.
• Interest Rate Differential: The current rate of however many years you have left on your mortgage, subtracted from your original rate and multiplied by your mortgage balance.

Using these methods you can easily calculate what your penalty should be. Again, do this in advance, so you can plan ahead before it becomes an emergency.

By ensuring you understand the agreement you’re entering into, and calculating possible penalties you can stay on top of your mortgage and avoid unpleasant surprises. While you can’t exactly get out of a mortgage penalty-free, you can take steps to make sure you’re not paying any more than you have to.

source: northwoodmortgage.com

Should You Negotiate Your Mortgage?

Finally thinking about joining the homeowner club – negotiation is a key trick of the trade when it comes to mortgages. If you know the power of negotiation, you will save yourself a lot of hassle, money and time in the end.

Becoming educated on the home buying process and the financial aspects of it, can give you the upper hand. Remember the lenders are competing for your business, you don’t have to just settle for what you can get, you can get the best if you know your stuff.

3 Tips to help you negotiate your mortgage

• Calculate your finances.
It’s important that you are fully aware of your finances. Know your credit score and how much money you have in the bank. If you have a high credit score, try to maintain it. If your credit score is on the lower end, speak with your financial agent to find out the best way for you to improve it. Your finances play a major role in the amount of money you will be offered by lenders and if you are confident with your finances, you will make a better negotiator. Use a mortgage calculator to check out payment and interest options.


• Shop around – visit different lenders and listen to their offers.
Be prepared to visit a few lenders to find the best deal for you. They should lay out all of the information in a clear and concise way, so you will be able to understand 100% of what they are offering.


• Don’t make any impulsive decisions.
Think of the big picture – don’t rush it. Take time to think about the offers and what looks the most attractive to you.

There are many mortgage terms that lenders are usually willing to negotiate, but two of the main ones are:

1. The Amortization Period
Let’s start with what the amortization period is on a mortgage: it is the period of time it will take to repay your debt (mortgage) in installments on a regular fixed schedule. The amortization period makes a huge difference when it comes to your mortgage payments and the amount of interest that you will pay on the mortgage life.


2. Interest Rates
These rates vary but lenders are able to offers some customers ideal rates.

Speak with one of the experts at Northwood Mortgage to find the best mortgage for you.

source: northwoodmortgage.com