🏠"I'm ready to sell!"đźŹ
Great! Now, what kind of mortgage do you have?
Fixed 5-year mortgages are by far, the most popular. Over 70% of home buyers choose this predictable option. When you have a fixed income, you can see how a fixed mortgage would seem to make sense. However, if you may be moving for work, moving in with your partner, or expecting other life changes, a fixed mortgage may not be the best option. Studies show that homeowners move on average every 3 years. The penalty for fixed mortgages can be high. IRD (interest rate differential) or 3 months' interest, whichever higher, is the penalty. IRD depends on a lot of complex factors including your current mortgage rate and the market. In short, the lender wants the interest you would have paid for the rest of the term upfront. If you're in year 3 of 5, this is expensive. Not the best option.
Here are some tips to help you avoid mortgage penalties:
✔If you're thinking about selling, don't renew your mortgage early and lock into a 5 year fixed. Go ahead and renew on time, but into a variable rate mortgage (only 3 months' interest penalty - the lowest penalty!)
✔Time listing your home with your upcoming mortgage renewal.
✔If you like flexibility, go with a variable mortgage from the get-go. A mortgage professional can help you with the details and the best plan for your budget.
✔Be sure of your long-term plans if you have a fixed mortgage.
✔Ask your current lender what your mortgage penalty is if you were to sell today.
✔Check if your mortgage is "portable".
✔Ask a mortgage professional for help.