If you had to break a contract for the same product which would you prefer to pay — $3,375.00 or $15,375.00? So why are people paying the higher amount?

Statistics show 70% of people who sign a mortgage contract sign a five year fixed rate mortgage contract.

Of these 70% that sign a five year fixed mortgage contract, 58% break them on average after year 3. Wow –58% — that is a lot of people breaking their mortgage contract!

Reason why? It was an unexpected event. Most thought they would be in their home for 5 years but then came the unexpected — job change, marriage, move, renovations,  or the other umpteen possibilities

Let’s take the story of Jennifer and Cindy who are each homeowners, and quite content in their homes.  Jennifer and Cindy work in a company that has recently decided to expand and will be moving their positions to a different city and province.  They each have decided to sell in order to buy a home in their new location.  When Jennifer breaks her mortgage to sell she pays a penalty of $3,375.00 and Cindy pays $15,375.00

Why does Cindy pay more and a lot more?  All the variables are the same for each of their mortgages —except for one– their choice of lender.   Let’s take a look at what is happening. Continue reading →