Mortgage Blog

Why do people break their mortgages?

May 15, 2018 | Posted by: Holly Cochrane

When people buy a new home or sign a mortgage renewal offer their intention is not to break that mortgage. However, life happens, circumstances change and sometimes homeowners need to break their mortgages.

Let’s discuss some of the most common reasons people break their mortgages.

Equity Take out-  Some areas of the country have seen an increase in property values or perhaps over time some people have built up their home equity. Lots of home owners will take out equity and utilize the funds for other purposes. Possibly to purchase an investment property, pay off debt (debt consolidation) or to do home renovations.

Sale and purchase of another home- First time homeowners generally buy a starter home. It allows them to buy in a lower price range and invest in their first real estate property. Over time perhaps their family has out grown the space and they need to buy a larger home. It is important to confirm if your mortgage is portable if the house you are buying is not your forever home.

Marriage/Relationship break-up- When a couple decides to split up and they own a property together, the mortgage terms will be broken. Whether it is the scenario that one person is staying with the home and buying out the other owner or if the home is being sold.

Illness or changes in life circumstances- Life definitely can throw curve balls! Whether it be a death of a partner or someone on title, illness or unemployment, the mortgage may need to be refinanced or the home be sold.

Pay off the mortgage before the maturity date- Perhaps you received an inheritance, won the lottery or gained a new job with a higher level of income you may get the chance to pay off the mortgage sooner. Depending on the terms of your mortgage, will determine if there are penalties when paying it off early.

These are a few of the reasons why people break their mortgages. It is important to be well informed and ask your mortgage broker these types of questions so that you understand the risks of breaking your mortgage early.

My team and I are here to help you and to provide you the best possible advice! Please let us know if you have any questions about your current mortgage.

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