The most common situations that lead to a penalty (taux hypothecaire)

The most common situations that will lead to a penalty

(Note: This article is part of a group of articles on the subject of mortgage penalties. It may be that your inquiry regarding penalties may be better answered in another article. The list of the other articles on penalties can be found at the end of this article.)

Penalties charged by lenders on a mortgage loan that is paid off sooner than the maturity date can be avoided in certain situations; in other situations, you may not have a choice in the matter.

The sale of your home: To sell a home does not automatically mean that you have to break your mortgage contract and pay a penalty (check if your mortgage is portable) but if you are not going to buy another house or if you are moving outside of the country, then you do have to pay a penalty. Before despairing, take the time to read the article How to lower or avoid a penalty? in order to at least save some money.

Refinancing for debt consolidation

Mortgage refinancing is an excellent way to consolidate debt and allow people to get their finances resituated. It works really well for most people. However, it is important to examine the way it is done. It may work better to take out a second mortgage instead of consolidating one mortgage, especially if you do not have much time left on your mortgage. A qualified mortgage consultant will be able to calculate the best ways to handle situations such as this, since each situation is different and requires a different solution.

Refinancing for renovations:

Renovating often requires more money to have the work done. There are three ideas that can save you money if you are considering refinancing for renovations:

Some kinds of work are considered urgent and should be done immediately. When this is the case, you should see if you can choose the option of financing the renovation with a personal loan or a line of credit loan. When you renew your mortgage, you can include the renovations in that refinancing package, and pay off the other loan.

If you plan to renovate your home in order to sell it more quickly or for more money, it is possible to refinance with an open mortgage so that you do not have to pay a second penalty once you sell, or obtain the second mortgage for the home improvements.

If you have chosena property that you plan on buying in the near future, but want to renovate once you have bought it, you also have an option known as the renovation loan option. In this case, you can borrow money now for the renovations you will do once the home is purchased.

Marriage separation: In the case of separation, the most usual practice is that one of the partners buys half of the home from the other partner. In this case, it may be possible to request a balance transfer rate for additional funds.

Sometimes, this will not work because the salary of the one partner who wants to take over the mortgage is not sufficient to qualify him or her for a new mortgage. If you have such a problem, we suggest you get in touch with our office to see if you can take advantageof a product called a “self declared revenue loan” to meet your home loan needs.

You will probably have a penalty for breaking the loan contract, but you will still have your home.

Executing a will: In the event of death, it is oftennecessary to sell a home. Certain lenders do not charge a penalty in these cases. You have to find out.

Carefully consider your options

Before making any decision that will lead to a penalty, discuss your situation with an accredited mortgage counselor (CHA) to learn whether there is not another solution.

It is, after all, thousands of dollars we are talking about; it is well worth your trouble to find out.

Gregory is an Accredited Mortgage Professional (AMP). To get more information on mortgage rates - taux hypothèque, please visit: Hypothèques - Mortgage Intelligence