Life is filled with unexpected twists and turns; sometimes, your mortgage must adapt accordingly. Whether you’re seeking more financial stability, hunting for a better interest rate, or responding to shifting family dynamics, moving your mortgage to another lender can be daunting. In this post, we’ll delve into the intricacies of mortgage relocation, and break down the costs and crucial considerations you need to bear in mind when making this significant financial move.

There are three key triggers for mortgage relocation. These include:

1. Financial Evolution: Changes in your financial situation, such as an income increase, job loss or a desire to decrease monthly payments.
2. Interest Rate Fluctuations: If you got stuck renegotiating during a high-interest rate period, decreasing rates may be an irresistible incentive to refinance.
3. Lifestyle Changes: Caring for an aging parent, a new baby, or children moving out may require you to upsize or downsize your home, necessitating a mortgage adjustment.

Now, let’s unravel the costs involved when you decide to make the mortgage move.

Costs of Breaking a Mortgage Mid-Term

When you’re considering breaking your existing mortgage mid-term, it’s essential to be aware of the following potential costs:

1. Prepayment Penalty – Lenders may impose penalties for paying off your mortgage before the term ends. This penalty is usually the higher of three month’s interest or the interest rate differential (IRD).
2. Administration Fees – Administrative fees can accumulate when you’re in the process of changing lenders or mortgage terms.
3. Appraisal Fees – If a new property appraisal is needed, it comes with its own set of costs.
4. Reinvestment Fees – A charge to recoup the costs associated with originating your mortgage.         
5. Mortgage Discharge Fees – When you pay off your existing mortgage these fees are associated with getting the mortgagee off the deed of the home.
6. Cashback Repayment – If you received cashback as part of your initial mortgage, be prepared to repay it when breaking the mortgage.

Costs of Breaking a Mortgage at Renewal

Even when your mortgage is up for renewal, there are still costs to consider:

1. Mortgage Discharge Fees – When you pay off your existing mortgage these fees are associated with getting the mortgagee off the deed of the home.
2. Administration Fees – Administrative fees can accumulate when you’re in the process of changing lenders or mortgage terms.
3. Appraisal Fees – If a new property appraisal is needed, it comes with its own set of costs.
4. Reinvestment Fees – A charge to recoup the costs associated with originating your mortgage.
5. Mortgage Registration with a New Lender: If you switch lenders at renewal, expect registration fees.

Critical Considerations When Your Mortgage is Up for Renewal

If you are nearing your mortgage renewal here are some considerations to help you navigate the period:

1. Start Early: Begin your mortgage renewal process 3-6 months in advance to thoroughly explore your options.
2. Big Picture Assessment: Consider your long-term goals. If you anticipate a move in the near future, a shorter mortgage term may be more suitable.
3. Beyond the Rate: While interest rates are significant, don’t fixate on them exclusively. Examine other factors such as penalties for breaking your mortgage and prepayment options/penalties.
4. Seek Professional Guidance: Consult a trusted financial professional who can guide you through the complexities of mortgage moves.

Deciding to move your mortgage is a big decision that requires careful consideration and planning. By understanding the costs involved and keeping key factors in mind, you can make a well-informed choice that aligns with your financial goals. Whether you’re aiming for financial stability, chasing a better rate, or adapting to a life change, moving your mortgage can be a strategic move towards achieving your dreams.

Did you know Alterna’s team is here to provide you with Advice for Life including helping you navigate your mortgage? Let us help you.