I’ve seen a few clients lately who were very surprised at their mortgage payout statement. Unfortunately, the penalty on payout for one couple was a staggering $20,000! Here are some tips to consider before you decide to change lenders in the middle of a term:
- Call your current lender’s customer service and tell them you are considering closing out your mortgage account with them. Tell them you need to know what your penalty, administration and other fees would be – make sure to say you want to know all the costs and how they are calculated. If possible, get it in writing from them.
- Ask what they would offer to keep your business – Can they waive the penalty or other fees? What would the new rate be? What would the rate be if you were to pay the penalty and get a new mortgage? Don’t commit until you have more information from other lenders or brokers.
- Talk to a mortgage broker and give them the information your lender provides. Ask the broker to explain, in detail, how the product they offer would be better for you financially.
- If you are in the middle of your current mortgage term and purchase a new property, ask your lender if it is possible to port the mortgage or increase the amount and blend the rate with a new mortgage to avoid penalties and costs.
- With a new mortgage, always ask what costs would be applied if you were to close out the mortgage early and how any penalty would be calculated.
It’s always best to seek information, knock on the door of your current lender and ask lots of questions. Ask your lender or broker if there are any other questions you should ask.
Download the PDF: Concepts Newsletter – Spring 2009