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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.

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