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Wednesday, February 17, 2016

Do you know how much your interest penalty is if you buy out your mortgage early?

Many people, myself included before I became a real estate broker, don't have a good understanding of what penalties might be incurred if you decide to buy out your mortgage early (prepay before the term is up).

It's not just the "3 months interest" ever since the CMHC removed the cap on their insured mortgages.  The lenders now generally "clawback" (probably not the right term) the discount you were given on your rate.

For example.  If they gave you a 20% discount on the posted rate on a 5 year term and you decided to sell after losing your job 1 year into the term, they would usually charge you for the 20% "discount" for the 4 years they are losing out on your payments.

This has a big effect on potentially limiting your options if life changes for you (and it always does).

In 2012, the government required banks to post online prepayment penalty calculators from all lenders.

Here are the big six below in case you wanted to know what your penalty would be if you decided to sell your home and not port your existing mortgage over.

  • National Bank of Canada
  • Bank of Montreal
  • CIBC
  • Scotiabank
  • Manulife Bank
  • Laurentian Bank
  • TD Canada Trust
  • Royal Bank

  • Contact me today for a Free Home Value Report or to chat about the current real estate market at www.kimlouie.net

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