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Interest rates are down – should you break your mortgage?

(NC) The pandemic is causing many of us to re-evaluate our finances. If you are thinking of renegotiating your mortgage to take advantage of a lower interest rate, be aware that this could mean having to break your mortgage contract.

If you break your mortgage contract you may have to pay a fee, called a prepayment penalty.

Before breaking your mortgage, make sure the benefits outweigh the costs. Far too many homeowners who have broken their mortgage contracts have been shocked by penalties amounting to tens of thousands of dollars, or other fees required to complete the transaction.

Know the costs

Every mortgage contract contains different terms and conditions. Federally regulated financial institutions must provide you with key information in a box at the beginning of the mortgage agreement, including information about any penalties and fees that will apply if you break your mortgage contract.

As a consumer, you have the responsibility to read your mortgage agreement and understand the penalties and fees associated with breaking your mortgage contract. Call your financial institution to speak to a knowledgeable person for detailed information on prepayment penalties or check out the prepayment penalty calculator available on their website.

Consider other options

Some mortgage lenders may allow you to extend the length of your mortgage before the end of its term to take advantage of a lower interest rate. With this option, you don’t have to pay a prepayment penalty. Lenders call this option the blend-and-extend, because your old interest rate and the new term’s interest rate are blended. Keep in mind that you may need to pay administrative fees.

Depending on the cost to break your mortgage, it may be best to wait until the end of its term and shop around for a new contract that provides a lower interest rate or more flexibility.

The Financial Consumer Agency of Canada provides unbiased and fact-based information on mortgages you can count on. You can learn more about the costs of breaking your mortgage at canada.ca/money.

 
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Managing your finances during tough times

(NC) Understanding how to manage your money and budget better is important for financial health, especially during uncertain economic conditions. Each person’s situation is unique and requires a personalized approach, but with education and confidence, financial planning can become a less arduous task.

According to the TD Financial Health Index, a national benchmarking survey providing a portrait of Canadians' financial well-being, women tend to have lower “financial health” than men – particularly among younger groups. Women received an average financial health score of 64 – lower than the average score for all Canadians. 

Regardless of financial management experience, taking small, thoughtful and actionable steps towards building your wealth management skills can help improve your financial profile in any circumstance.

Here are some resources to consider:

  1. Read, review and reevaluate. Empowering yourself with the right resources can better equip you to make stronger decisions for your financial future. Online tools, like the TD Direct Investing Learning Centre, can walk you through the different types of investments, account types, risks and investment plans, and teach you how the market works before you get started.
  2. Build your financial confidence. Ensure you are actively participating in the financial planning process. When learning how to build or elevate your investments, also take time to learn the language and increase your financial awareness. Knowing the basics can enable a better understanding of your investment options and strengthen your self-assurance in direct investing.
  3. Create a virtual community. Learning from other personal and professional experiences can generate investment ideas, give you inspiration for your portfolio, and keep your investment goals on track. Participating in webinars, interactive sessions and master classes through the TD Direct Investing Learning Centre is a great way to build your skills and knowledge.
 
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