Should I break my mortgage early?

Samantha, a client of ours, called to entertain whether she and her partner should take advantage of the lowest rates and break her mortgage early.

In 2021, these calls are what we are entertaining the most. Whoever believed Canadian mortgage rates would be in the 1% range. I know I didn’t. But, who would have predicted a world pandemic? Many things have changed and the Canadian government given the COVID-19 situation, have lowered rates to record lows to stimulate the economy.

What to do? As an ex-banker, we realize that banks do not lose. We asked Samantha to investigate what her penalty would be first. Once we get the amount of leaving the bank we will do the math to give our clients expert advice as to whether it’s worth it or not. Samantha’s penalty would be approximately $24,000. Was it worth breaking the mortgage? Absolutely not. The fact remains that in most cases, it favors strongly the bank.

When can early renewal work in your favor? In most cases, it really works when your individual circumstance has lots of debt and you are suffering from cash flow problems. In these cases, you can generally solve your debt problem, yet be in the same position amortization-wise as was previous, with more money in your pocket. The other way it can work for the client is when the mortgage is coming due the same year.

If you have questions, Sean and I will be here to assist you to give you an assessment of your situation with no obligation.