Moving on From Your Current Mortgage
If you already own a home and you feel like it’s time to move on, you’re going to have to take some time to consider what you’re going to do with the mortgage. If you’ve already paid off your existing mortgage and your house entirely belongs to you, then the process will be a lot simpler.
You’ll be able to sell your home independently if you own it without having to worry about it being financed, and the main thing to focus on is getting as much money as possible for it. Of course, the last thing that you want is to sell your home and not have the next place ready to move into.
Even if you are 100% owner of your current home, buying a new house and selling your previous one can be a delicate balancing act, and that’s even truer when you still have a mortgage. However, in a few ways, having an existing mortgage for your home gives you more options.
In this short guide, I’m going to give you some advice for switching houses when you have an existing mortgage. There are a few ways that you can minimize the money that you have to spend, and you may even be able to save some cash when you switch homes, allowing you to renovate or remodel as you move in.
What Can You Do?
If you want to move and you signed your mortgage at a time when interest rates were unfavorable for the buyer, then you may want to consider breaking your existing agreement. Most mortgages can be broken, and there are a few different penalties that can be incurred.
The simplest form of penalty is a flat charge for three months’ worth of interest on the mortgage that you’re breaking. However, the lender has the choice of picking the fee that you pay from either this or an interest rate differential, which calculates the difference between your current and future agreements.
If you own a home in Winnipeg, or anywhere else in Canada for over five years, then you won’t have to worry about the IRD since the three months of interest gets chosen automatically. This means that it pays to be patient since the IRD will usually be higher than three months of interest.
Keep in mind that you should always get the details about your IRD penalty from your lender directly, as this will allow you to ensure that you’re paying what you should be. While a lender wouldn’t try to intentionally scam you, mistakes are possible, and you want to be sure that you aren’t giving away money.
If you don’t plan on breaking your current mortgage, then you can also combine it with the next one that you’re going to get. This is particularly helpful if you want to avoid paying the penalty on it or if you want to combine your currently favorable interest rate with one that is a little steeper.
Keep in mind that every situation is unique, and I don’t know enough about your position to determine whether or not you should blend your mortgages or break your previous one. However, I offer consultations for clients who are considering their next step as homeowners.
I can take a detailed look at your current mortgage and the next one that you have on the radar so that I can help you decide the best course of action that you have available.
I can even find a more favorable mortgage on the house that you’re currently looking at, so don’t hesitate to contact me.