The Most Common Situations That Lead to a Penalty (taux Hypothecaire)
November 21, 2008
The most common situations for mortgage penalties
(Note: This is only a part of a series of critical articles on the subject of mortgage penalties. You may have a question that is better answered in one of our other features. The complete list of articles is at the end of this article for your reference.)
Penalties charged by lenders on a mortgage loan that is paid off sooner than the maturity date can be avoided in some situations; in other situations, you may not have any choice in the matter.
The sale of your home: Selling your home does not mean that you necessarily have to break your mortgage contract and be subject to penalties (find out if your mortgage is portable, for example), but if you are not going to buy another home, or are moving to another country, you will have to pay the early payment penalty. There may be a solution; if you read our article How to lower or avoid a penalty?, you may be able to 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 be careful about the way it is done. It may be a better idea 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 advisor 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:
Usually when you do renovations, you will need additional funds in order to have the work done. If you are considering renovating, here are three ideas that may help you save money overall:
Some kinds of work are considered urgent and should be done right away. 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 deal, and pay off the other loan.
If you plan to renovate your home in order to sell it more quickly or for a better price, it is possible to refinance with an open mortgage so that you will not have to pay a second penalty once you sell, or obtain the second mortgage for the home improvements.
If you plan on buying a property that needs to be renovated, you can probably put together a plan to have the renovation financing included in your home loan. There is a special mortgage called the renovation loan option that covers these situations. You borrow money now for renovations you plan once you take possession of the house.
Marriage separation: In the case of separation, the most common practice is that one of the partners buys half of the home from the other partner. When this happens, it is 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 enough to qualify him or her for a new mortgage. If you have such a situation, we suggest you contact our office to see if you can avail yourselfof a product called a self declared revenue loan to meet your home loan needs.
You will still most likely incur an early payment penalty, but you will have kept your home.
Executing a will: In the event of death, it is frequently]necessary to sell a property. Certain lenders do not charge a penalty in these cases. You have to find out.
Carefully consider your options
All mortgage decisions are important, and you should take the utmost care to see if you have done all you can to avoid a penalty. Sometimes you cannot avgod it, but if you consult with a professional mortgage advisor who is accredited (CHA), you will surely find out the best options available.
Mortgage penalties costs thousands of dollars; it is worth the time and troubleit may take some time to find out how to avoid them.
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