(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 articles. 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 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 inevitably mean that you have to break your mortgage contract and pay a penalty (check if your mortgage is portable) but if you are not planning to buy another house or if you are moving outside of the country, then you will 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
Most people use the mechanism of mortgage financing in order to consolidate and lower their debt. It is excellent solution for most people, since it allows them to straighten up their financial situation. Sometimes, it is a very good idea to take out a second mortgage instead, especially if there is not a lot of time left on your original mortgage. You should contact a qualified mortgage broker, who is able to make all of the calculations to find the best answer for your individual situation: decide upon a second mortgage or refinance your current mortgage.
Refinancing for renovations:
Renovating usually requires more money to have the work done. There are three ideas that can save you money if you are considering refinancing for renovations:
There is some work to your home that may have to be done right away because it is urgent work. If this is your situation, you may want to consider taking out a personal loan or a line of credit instead of negotiating a new mortgage. Once you secure a new mortgage, the old loan can be incorporated into the new one and be paid off.
If you want to renovate your home, either to sell it, or so that you can get a higher price for it, you should think about an open mortgage to finance these types of renovations. With this type of home loan, you will not have to obtain a second mortgage, or incur prepayment penalties.
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 ârenovation loan optionâ that covers these situations. You borrow money now for renovations you plan once you take possession of the house.
Marriage separation: If a couple separates, the most common occurrence is that one of the partners will buy out the home from the other. In this instance, most banks do allow the new owner to merely have a balance transfer rate for any additional funds.
This is not always possible; the income of the partner taking over the mortgage may not be sufficient to obtain a new mortgage. If you are encountering such a problem, please contact our office to see if you can use a specialized product called a self declared revenue loan to obtain the mortgage.
You may still have a penalty for breaking the loan contract, but you will be able to keep your home.
Execution of a will: In cases of death, often a property will have to be sold in order to satisfy the probate requirements. There are some lenders that do not charge a penalty in these cases; you have to find out from the lender.
Carefully consider your options
Before considering any decisions regarding your mortgage, be sure you have taken any steps to avoid a penalty. It may be unavoidable, but the best thing to do is to consult with an accredited mortgage counselor (CHA) to find out all the options available to you.
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 hypothecaire, please visit: Mortgages - hypothèqueThis article is free for republishing
Source: http://www.articlealley.com/article_192935_19.html
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