Why Do People Break A Mortgage?
Current statistics indicate that over 60% of Canadians break their mortgage earlier than a 5 year term, the average is at 36 months.
The common reasons for breaking a mortgage are:
Sale of a home
To take out equity from the home for investment or renovation
Sale & purchase of a new home where the mortgage is not portable
To consolidate and payout debt with the equity in the home
To get a better interest rate when the market has changed
Change in marital status
Change in life circumstances eg. Job loss or additional children
To remove someone from the title of the home
To restructure the mortgage
To pay the mortgage off completely eg. Winning the lottery.
When you break a variable rate mortgage you will be charged 3 months interest. For a fixed rate mortgage you will typically be charge the higher of 3 months interest or the Interest Rate Differential (IRD) penalty on a $300 000 mortgage can range from $2400 to $14 000 it is imperative that you pay attention to the prepayment penalty information in your mortgage commitment. In Canada all national lenders must include their prepayment calculators or their website for the public to access.