Between fine print and finer print there’s always a catch, so why should your mortgage be any different than your phone bill?
Typically, when you sign off on your mortgage paperwork, the last thing on your mind is ‘how much will this cost me if I break it’ so why would you ever check into that? So, let’s “check” into it now;
If you have a 5-year fixed mortgage with a Big-5 bank that’s in the $500,000 range, you may be surprised to find out that it will run you about $15,000 to break your mortgage. $15,000!!
Since the bank prices in an expectation of you paying interest over a 5-year term, a penalty is calculated if you depart, and you have to pay it, few exceptions.
So where do we go from here? Well, next time you’re getting into a mortgage transaction look for a lower break fee option by considering a couple simple strategies such as; going variable-rate (which on break would require 3-months interest) or use a Specialty Lender (non-big bank) who often use lower break-fees as a competitive way to sell mortgages).