In March of this year (2012), the Government of Canada and the Financial Consumer Agency of Canada announced a new proposal on how to disclose mortgage pre-payment penalties on closed fixed term mortgages.
The initial reaction of the lenders comes to no surprise. Many are putting up resistance and some of them are saying they are confused.
The reality of the situation seemingly is that the lenders themselves were not quite sure how their penalties were being calculated. I witnessed this firsthand towards the end of last year when helping a few clients refinance and early renew their mortgages on the primary residence.
On one occasion, my client called the lender on 3 separate occasions getting a different answer each time to the same question of “how are my penalties going to be calculated and can you give me an approximation if I were to pay this mortgage out on December 31, 2011?”
There has been a lot of confusion surrounding pre-payment penalty calculations over the years, with there not being a lot of consistency with the lenders lenders. For example, if you had your Mortgage with TD, the penalty would be calculated differently than if it were held with First National.
Now, things seem to be rounding into form-at least when it comes to some consistency around pre-payment calculations. Lenders are now seemingly taking the time to clearly explain how this penalty will be calculated in case of an early payout of the mortgage.
As a borrower it is very important to look at these calculations carefully. You would be doing yourself a huge favour to run a few different likely scenarios prior to locking into a closed term fixed rate mortgage.
If you have any questions about pre-payment penalties or need help figuring out how your lender calculates them. Or even if you want to compare the calculations between lenders, feel free to drop us a line, we’re here to help!
Search Terms Related to Mortgage Prepayment Penalty
mortgage prepayment penalty calculator, mortgage prepayment penalty disclosure, mortgage prepayment penalty deductible, mortgage prepayment penalty tax deductible, yield maintenance mortgage prepayment penalty, refinance mortgage prepayment penalty, mortgage prepayment penalty excel,
prepayment penalty calculator
Articles Related to Mortgage Prepayment Penalty
Written by Aleem – The Mortgage Specialist
Canada Mortgage Rates- a Handy Guide to cibc mortgage rates
The Rate Tango: Canada Mortgage Rates Variable vs Cibc Mortgage Rates Fixed. Become an expert on Canadian Mortgage Rates with our Handy Guide. Many first time home buyers are wondering whether they should take advantage of this low rate or if they should lock in the more secure fixed rate mortgages.
Is This The End Of 5% down payment?
CMHC is the government body that insures mortgages. To put it in the simplest of terms, when CMHC insures a mortgage, it means the bank essentially does not have any risk when it issues the loan. Of course there’s some risk carried by the bank but the Government…
Mortgage Penalties In the Media Again
A self-employed, single mother of a 12 year old boy, also taking care of her elderly mother, made CBC headlines for having to pay a $30,000 early termination penalty on her mortgage, when she was forced to sell her house in April, due to the COVID-19 pandemic.
Daily Corona Virus Mortgage Updates
Canada’s lowest nationally available conventional variable rate is just nine basis points cheaper than a comparable 5-year fixed rate. That minuscule “fixed-variable” spread is now 80% narrower than its 10-year average. The market is no longer compensating new borrowers for the risk of a floating-rate mortgage.
CMHC Rule Changes
Traditionally – if the waters are rough, you do whatever you can to not rock the boat. CMHC today however has rocked the boat. The housing market has weakened over the last few months, due to the pandemic, but Canada’s largest default insurer is making it tougher for people to get a mortgage…
How to Get Financing during the COVID Pandemic
Most of you are going to be very angry at this post because it may seem like I am actually encouraging people to get out there and buy properties.As a matter of fact, anyone who calls me asking for financing options, the first question I ask them is: “Are you really going to be buying a property in the next 3 months?”
Variable Rate Update
During the start of the lockdown due to the COVID crisis, banks hiked their variable rates discounts to prime – 0%. At the time, we predicted that variable-rate discounts will improve significantly once again. Well, very slowly now, we are starting to see this happen.
Coronavirus related to your mortgage
Believe it or not, the coronavirus can have an impact on your mortgage and your interest rate in particular. Listen below to find out exactly how and why.
The Recent Bank of Canada Rate Increase- one broker’s thoughts
What about this recent Bank of Canada Interest Rate Increase? If your discount from Prime -which is now now 3.20%- is 0.50% or deeper – then the variable rate product remains a really great place to be. If your discount from Prime is 0.25% or less, then depending on which lender you are with you may consider…
Employment status Impacting Your Mortgage Qualification
If you are applying for a mortgage, the chances are that you are feeling confident about your current employment status and your ability to find a similar position if need be. Your employment is a key aspect of being approved for a mortgage…
If you would like more information or a free consultation contact Aleem below, and as a Certified Mortgage Specialist let me help you get the home of your dreams. Great Mortgages, Made Simple
