The Most Common Situations That Lead To A Penalty (taux Hypothecaire)

By Author: Gregory van Duyse
Total Articles: 9
Comment this article

The most common situations that will lead to a penalty

(Note: This is only a part of a series of critical articles on the subject of mortgage penalties. You may have a question that is better answered in one of our other articles. The complete list of articles is at the end of this article for your reference.)

The penalty which is required by lenders because you have paid the balance of your loan before the end of the term of the loan can often be avoided, but in some situations, you may not have a choice. Here are those situations:

The sale of your home: Selling your home does not mean that you automatically have to break your home loan contract and be subject to penalties (find out if your mortgage is portable, for example), but if you are not going to buy another home, or are moving to another country, you will have to pay the early payment penalty. There may be a solution; if you read our article How to lower or avoid a penalty?, you may be able to save some money.

Refinancing for debt consolidation:

Mortgage refinancing is an excellent way to consolidate debt and allow people to get ...
... themselves resituated, financially. It works really well for most homeowners. However, it is important to be careful about the way it is done. It may work better to take out a second mortgage instead of consolidating one mortgage, especially if you do not have much time left on your mortgage. A qualified mortgage consultant will be able to calculate the best ways to handle situations such as this, since each situation is different and needs a different solution.

Refinancing for renovations:

Renovating usually requires more money to have the work done. There are three ideas that can save you money if you are considering refinancing for renovations:

Some kinds of work are considered urgent and should be done right away. When this is the case, you should check if you can choose the option of financing the renovation with a personal loan or a line of credit loan. When you renew your mortgage, you can include the renovations in that refinancing package, and pay off the other loan.

If you want to renovate your home, either to sell it, or so that you can get a higher price for it, you should consider an open mortgage to finance these types of renovations. With this type of home loan, you will not have to obtain a second mortgage, or incur prepayment penalties.

If you have chosena property that you plan on buying in the near future, but intend on renovating once you have bought it, you also have an option called the renovation loan option. In this case, you can borrow money now for the renovations you will do once the house is purchased.

Marriage separation: When married couples separate, it often happens that one of the partners will buy out half of the home from the other. When this happens, many banks will allow the new mortgagee to request a balance transfer rate for any additional funds

Sometimes, this will not work because the income of the one partner who wants to take over the mortgage is not enough to qualify him or her for a new mortgage. If you have such a problem, we suggest you contact our office to see if you can avail yourselfof a product called a self declared revenue loan to meet your mortgage needs.

You probably will still have to pay the early payment penalty, but you can keep your home in this manner.

Execution of a will: In cases of death, frequently a property will have to be sold in order to satisfy the probate requirements. There are some lenders that waive the penalty in these cases; you have to find out from the lender.

Carefully consider your options

Before considering any decisions regarding your mortgage, you want to make sure you have taken any steps to avoid a penalty. It may be unavoidable, but the best thing to do is to consult with an accredited mortgage counselor (CHA) to find out what your options are.

It is, after all, thousands of dollars we are talking about; it is well worth your trouble to find out.