What is a break fee, and when can it apply?
If you are interested in getting a home and a mortgage, you should familiarise yourself with the phrase ‘break fee’. Not everyone has to pay a break fee and not all lenders will put one in their contracts. When you sign for a mortgage, you sign a legally binding document that comes with terms and agreements both parties must follow, including you and the lender.
Typically, with a fixed-interest loan, you will pay a fixed interest rate that is low and consistent over a small period of time (on average it is three years). After the term is complete, your mortgage is subject to a variable interest rate and it changes. If at any time during the fixed-interest rate you get the funds to repay the entire loan or a large part of it, you can repay it, but you may have to also pay a break fee.
This also applies to broken contracts and refinancing. Some lenders consider refinancing a mortgage, even with the same lender, as a breach of the contract and will charge you the fee. The fee depends on the interest you still owe on the leftover terms.
Break Fees and Applications Conclusion
Mortgage House understands how stressful finding the right mortgage can be, especially when there are consequences to making changes and large repayments on the loan. Let our Mortgage House lenders help you find a unique and long-lasting mortgage solution!