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

The situations that most frequently result in a mortgage penalty

(This article is part of a group on the topic of mortgage penalties. There may be a topic that is of particular interest to you, you should check to see if it is expressly addressed in one of the articles. The list is included at the end of this article.)

There are penalties that are charged by lenders on loans that are paid off prior to maturity. There are some cases where these kinds of penalties can be avoided. Of course, there are also situations where charges such as these cannot be avoided at all.

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 (see 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 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:

Mortgage refinancing is an excellent way to consolidate debt and help people to get their finances resituated. It works really well for most homeowners. 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 advisor will be able to calculate the best ways to handle situations such as this, since each situation is different and needs a different solution.

Refinancing for renovations:

Generally, when you perform a renovation, you require money to do it. If you are in a situation where you have decided to renovate, consider these ideas that will help you save money:

There is some work to your home that may have to be done immediately because it is urgent work. If you have a situation like this, you may want to consider taking out a personal loan or a line of credit instead of negotiating a new mortgage. Once you do a new mortgage, the old loan can be incorporated into the new one and be paid off.

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 will not have to pay a second penalty once you sell, or obtain the second mortgage for the home improvements.

Don’t forget that if you want to renovate a home that you are going to buy soon, there are certain mortgages which have a renovation loan option. You can then borrow the money immediately for renovations you will do in the future.

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. When this happens, it may be possible to request a balance transfer rate for 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 avail yourself of a specialized product called a self declared revenue loan to get the mortgage.

You probably will still have to pay the early payment penalty, but you can keep your home in this way.

When a will is executed: In the case of death of the owner of a property, the property often has to be liquidated in order to meet the requirements of the will. Some lenders will waive the early payment penalty fee in such cases. You just have to study and find out for yourself.

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 discussing; it is well worth your trouble to find out.