It can be tempting to break your mortgage or sell your home if you see a lower interest rate or a home that better meets your needs. In some cases, you may not have much of a choice in the matter, such as if you have to move for work. Here are some of the pros and cons of selling your home before the mortgage term ends and breaking the contract:
Pro: You may be able to get a lower interest rate and be able to pay off the mortgage faster if you keep the payments the same.
When moving into a new house, it is possible that you could get a lower interest rate than on your previous mortgage, and if you budget your mortgage payments as if you are paying into your old mortgage, then you could pay off your new mortgage early.
Con: You could end up paying more in the long run because of fees and a prepayment penalty.
The fees for breaking a mortgage before the term ends are very high, and even if you make higher payments on your new mortgage, there is no guarantee that the interest saved will be enough to cover the penalties. However, your mortgage advisor can run the calculations for you.
Pro: You may be able to lock in a lower interest rate for the new mortgage term.
Selling your house allows you to look for a lower interest rate for your new home, saving you money in the long run.
Con: You may no longer qualify for a mortgage under current economic conditions.
Times are tough, and it could be that you are selling your house not to buy a new one but to move into a rental. If this is the case, ensure that the benefits of selling your home early outweigh the costs of the penalties.
Before selling your house early, make sure that you read all of the fine print to see what costs are associated with breaking the mortgage contract. A mortgage advisor can provide valuable advice to navigate the possibility of selling your home before the mortgage term ends.