Generally, there are two high seasons to buy(sell) a property. The spring and the fall. That is when you might find yourself shopping for a mortgage and your aim might be to get the best rate for a traditional 5-year term mortgage. When you find yourself in that situation, I would invite you to consider a few more elements in your process.
How many times have I seen my clients having to pay quite a hefty penalty to break their mortgage contract? Whether it’s a separation, divorce or their family is growing their property no longer works for them. The reality is that when you need to sell the house and break the mortgage, your financial institution will generally penalize you with an amount which would equate to the greater of 3 months of interest or the loss to the financial institution. Negotiating your new mortgage could actually cost you money in penalties. The more advantageous your mortgage interest rate is, the greater the penalty might be.
Recently, I heard that 2 institutions will go as much as 6 months penalty. Keep in mind that you always have a choice to refuse any financial institutions offer and negotiate or go somewhere else. Understand your product flexibilities Most mortgages have an additional payment option to pay down 10% or 15% every year. Should you come into an inheritance or a nice lump sum of money and decide to reduce your mortgage balance, you could, for example, to put down 30,000.00$ in December on an initial 300,000.00$ mortgage and a few weeks later, another 30,000.00$. The original amount is always used when applying the additional payment percentage. Now, some institutions will have conditions as to when you will be able to do this. Sometimes it’s only on a certain date or once or twice a year. It is important to understand that before signing. Should you have to break your mortgage ensure they apply this 10 or 15% additional payment before they apply the penalty.