Breaking Your Mortgage With Houses for Sale in Edmonton Canada

So, you want to sell, but your mortgage term hasn’t ended yet – now what? Many sellers have been caught in the situation where they need to list their home for sale but still haven’t reached the end of their mortgage term. This is common when kids flee the nest, a new baby is born or you need to relocate for a job. In most of these cases, your home no longer suits your needs and a change is necessary. If you are considering breaking your mortgage contract to sell early, it’s important to understand the nuances of doing so. In this article, we will go over everything you need to know about selling your house before your mortgage has run its course. 

What Does it Cost to Break Your Mortgage Contract?

Depending on the type of mortgage you have, breaking your mortgage contract will have a different cost. For homeowners with open mortgages, selling your home can be done without paying any fees related to breaking the contract. However, those with closed mortgages will have to pay the penalties for selling early. Of all the costs associated with listing before your term ends, the prepayment penalty will be the highest. This is the fee for breaking the contract. Sellers should know that the prepayment penalty can vary in cost from hundreds to thousands of dollars. In addition to the prepayment penalty, you will also have to pay administrative fees, appraisal fees, reinvestment fees, and a mortgage discharge fee. It is also possible that you’ll have to pay back any line of credit or cash back that you received when you got your mortgage.

If you still want to sell your home, but you’re not keen on paying the costs of breaking the contract, there are other options. At some mortgage brokerages, you can extend the length of your contract and begin a new mortgage via a blended mortgage. This option allows you to blend the interest rates for the old and new terms and avoid the prepayment penalty. However, there may still be administrative fees.

Sellers should be aware that not every mortgage lender offers this option, so it’s important to do your research. In the event that your lender can’t do a blended mortgage, you will have to break the contract. As such, it is critical that you weigh the pros and cons of selling before your term is up. Ultimately, you may find that it is more worthwhile to pay down the rest of your contract and then list houses for sale in Edmonton Canada. 

Benefits and Drawbacks of Breaking Your Mortgage Contract

If you are serious about breaking your contract, be sure to understand the pros and cons of this decision thoroughly. While falling interest rates can make it tempting to renegotiate your mortgage or explore options like a blend-and-extend, it’s important to fully understand the financial impact of this decision before moving forward.

One of the key benefits of breaking your mortgage is the opportunity to secure a lower interest rate. This can save you money in the long run by reducing your monthly payments or allowing you to pay off your mortgage faster if you keep your payments at the same level. Locking in a lower rate also provides peace of mind, especially if interest rates are expected to rise in the future. With a lower rate locked in, you’ll have more financial flexibility moving forward.

However, breaking your mortgage contract isn’t without its downsides. The most significant drawback is the potential cost. When you break a mortgage, you are likely to face a prepayment penalty, which can be quite expensive, along with other administrative fees. These costs can quickly offset the savings from a lower interest rate, leaving you paying more overall. Additionally, there’s the risk that you may no longer qualify for a new mortgage under the current economic conditions, particularly if lending rules have tightened or your financial situation has changed.

Before making a decision, it’s essential to understand all the potential costs and benefits fully. Contact your lender to explore your options and ensure that breaking your mortgage contract is truly in your best financial interest.

Contact us About Selling Houses for Sale in Edmonton Canada!

For more information about selling houses for sale in Edmonton Canada before your contract is up, contact us today! We’d be happy to help you find a well-suited property in this quickly growing-city. Arrange a meeting with one of our experienced REALTORS® and discover how to achieve your end-of-year real estate goals. Be sure to reach out to us with any questions about Edmonton real estate for sale and stay tuned to our blog for more home-related content. Our Edmonton real estate agents look forward to working with you!