What is the penalty for breaking a fixed term mortgage?
A fixed-term interest mortgage is a home loan that a borrower takes out and a part of the term uses a fixed-interest rate. The fixed-interest rate only applies to a specific amount of time, but not the entire loan. The term average is 3 years, while a mortgage takes 30 years to pay off.
The penalty for breaking a fixed-term mortgage is a breaking cost or fee. The break cost is a fee that your lender can charge you if you repay your loan early, even if it is a simple partial repayment. Banks are businesses and want to make money on your loan, including the interest rate they set.
Because of this, if you break your contract before the term is up, you will owe the interest back on your loan. The exact amount owed is calculated with a few pieces of information, like the total term, loan amount, and what you have paid so far. Remember, not all mortgages and lenders require a penalty for breaking a fixed-term mortgage, but you should check directly with your lender for more information.
The Penalty for Breaking Fixed Term Mortgage Conclusion
Not all lenders are the same. Some lenders require a penalty fee for breaking a fixed-term mortgage called a break cost. It is expensive and can be as much as $5,000 depending on how much you borrow and the current interest rates.