Who pays the break fee?
Mortgages are hard to keep track of, especially since there are a lot of rules and regulations. The fact is, as soon as you have signed a contract with a lender, it is a legally binding document that must be followed by both parties. If not, the other party can take legal actions against you or place a penalty for breaking a term in the contract.
When you break the contract and make a large mortgage repayment or repay the entire loan before the fixed-interest mortgage term is complete, you may be subject to a break fee. A break fee or penalty fee is a fee that is charged to the borrower if they break the contract. Breaking the contract also includes refinancing with a different lender.
The fee is pretty hefty, which is why it is best to avoid having to pay it at all. You will need to pay a general penalty fee of up to $1,200 and your interest unpaid. The numbers add up in no time. Need help to choose a reliable and trustworthy mortgage? Our lenders at Mortgage House are happy to assist you starting with a free online consultation.
Paying Break Fee Conclusion
Overall, if you break a contract between you and a lender, you are the one who has to pay the break fee. Breaking a contract is serious, especially if penalties are listed in the legally binding contract.