When you take out a mortgage, you typically have to make monthly payments for the duration of the loan. Even if you can’t afford the house and need to sell it back, that doesn’t mean you have to pay a high price. You can save on your interest rate by making sure your mortgage costs are as low as they can go. Understand what penalties are and how they affect your total cost of home ownership. Learn how to calculate mortgage penalty in this article. With all of the different factors that come into play when taking out a mortgage and buying a home, it’s no wonder so many people get confused! This is especially true when it comes to figuring out whether or not there could be any hidden costs or consequences included within the loan you’re getting. Thankfully, we can help clear things up a little bit!
What is a Mortgage Penalty?
A mortgage penalty, in general, is any sort of extra cost or fee for breaking a contract or removing yourself from an obligation. In the case of mortgages, a penalty is usually charged if you decide to break the contract and refinance another mortgage loan to a different lender within a specified time frame. Now, the reason why mortgage penalties exist is because they protect the lender. Mortgage penalties are basically there to make sure that people don’t just refinance their mortgage over and over again whenever they don’t like the interest rate they’re getting. If you break the contract and refinance too quickly, not only will you have to pay a penalty, but you’ll also probably also have to pay a higher interest rate on your new loan.
How to Calculate Mortgage Penalty?
The best way to calculate mortgage penalty is to use RBC mortgage penalty calculator. All you have to do is enter the details of your loan (amount of loan, interest rate, etc.) and, in no time at all, you’ll know exactly how much you’ll have to pay if you break the contract and refinance. There are tons of mortgage penalty calculators available online, which makes it really easy to figure out the penalty. Many of these calculators also include graphs and charts, which can help make the information even easier to understand. When it comes to calculating mortgage penalty, the first thing you need to know is the amount of the original loan. You’ll also need to know the amount of the new loan, as well as your current interest rate, term length, and any other fees and charges. Once you put all of this information into the calculator, it’ll be able to tell you how much the penalty is going to be.
Bottom Line
Always remember that mortgage penalties exist to protect lenders. If you break your contract and refinance the loan too quickly, you’ll have to pay a fee. Remember that if you break the contract and find yourself with a mortgage penalty, it’s not a bad thing. It just means that you chose a more expensive loan with a better interest rate. If you don’t like the high cost of your loan, the best thing to do is to wait until rates go down.
