We are at the end of the topic of penalties.

It is possible to reduce or even avoid a penalty

That does not mean I’ll give you the means to force the hand of the lender for in your case they do not charge a penalty. It is not very common!

Here are some ideas that might help you avoid or reduce your penalty:

The portability option on your mortgage: Many mortgages have the option of being portable. Carrying a mortgage simply means transferring the security of real estate the mortgage of a property to another.

If the bank was entitled to take a house now, they have the right to adopt another.
When you exercise the right of transportability, the bank will want to review the matter (property, employment, credit) to ensure that the risk is acceptable.

The upside is that there is no penalty.

The weighted rate: Some lenders weigh the interest rate when you need a little more money on your mortgage. The original mortgage rate remains the same while the new amount at a rate higher or lower. Both rates are weighted in a single rate, in proportion to the amount of both loans. Example you have a mortgage of $ 247 500 at a rate of 4.74% with a term of 5 years. After 2 years, you want to make repairs and must increase your mortgage to $ 38 788 but today’s rate is 5.3% if the bank agrees to weight, you will pay a rate of 4.8245% for the remainder of the term (3 years) and you will pay no penalty.

Caution: When today’s rates are higher, some lenders increase the interest rate for the second part of the loan which amounts to a sort of penalty. In the example above, the true blended rate would be 4.8245% but in reality the bank charged them a blended rate of 4.88% or an increase of 0.0555% on the total loan or a rate of 5.71% on the new loan of $ 38,788 (when the rate of other banks from 5.15% – 5.20%). This increase is equal to an increase of $ 737.74 over 3 years. It’s better than paying a penalty of 2787.72 and have an interest rate of 5.15% on the total amount.

Refinance with the same institution: When a financial institution does not weigh the interest rate, it is possible that it is willing to eliminate the penalty if the refinancing is done with them. Lenders are more open to this kind of solution when the rate interest of the new loan is higher than the old interest rate (some lenders require clients to request a refund of penalty after the refinancing).

2nd Mortgage: When the amount you need is not very high or the time remaining before the end of the term of your mortgage, it can be to your advantage to have a second mortgage with a rate a little more above. In this case, simply do an analysis to determine whether it is better to refinance and pay a penalty or take a second mortgage with a rate a little higher. Make an appointment with us so that we can consider the matter with you.

Prepayment permitted: The penalty is payable on the amount of the mortgage, then to save it is possible to reduce the mortgage as possible. If you must pay a penalty and you have some money aside, it is possible to pay your mortgage with your cash. In this way the amount of the penalty will be lower.

There are so many important details in a small mortgage, as the penalty policy, it is important to work with an experienced mortgage professional. Some little advice here and there and you could save lots of money.