FIXED RATE MORTGAGE PENALTIES:                                                                         How the Big Banks Have You Hook, Line and Sinker 

For most homeowners, figuring out your mortgage penalty can be like solving a Rubik’s Cube. Mortgage penalties are written with so much ‘legalese’, they are totally confusing. The sad fact is that you don’t realize how costly it can be to break your mortgage until you have to, are forced to, or if you decide to refinance or sell your property and from what we see, while you may be told in the beginning any penalty will likely be 3 months interest, this rarely applies any more. Most bank penalties are IRD’S or Interest Rate Differentials which is a whole other game. 

Most don’t ever think they will ‘Break’ their mortgage when in fact over half end of doing so during the term. Life happens, changes occur and when they do your mortgage penalty from the banks cannot just be overwhelming, they can be (and usually are) shocking. 

Unfortunately the banks play games. They use the ‘Posted’ rate to calculate your penalty when in reality posted rate has nothing to do with your mortgage. This allows them to get more money from you.   

Please do not be fooled on any long term ‘Relationship’ or perceived comfort you may feel you have with your bank because any value from it is illusory. The Banks want you to choose a fixed rate over variable so they can charge you a (usually punitive) penalty if you have to break your mortgage. You see, you can only be charged a maximum of 3 months interest on a variable mortgage so please do not fall into the trap without knowing all the facts. 

You may feel more comfortable choosing a fixed rate with fixed payments and in dealing with a local branch versus a mortgage broker, but it can end up costing you a bundle for such misplaced trust. The problem is in doing so you do not receive professional advice and counsel we provide in your best interests. 

Don’t get me wrong, we are not advocating variable over fixed, it’s just that you may not be aware of several other important benefits to go variable. We also want you to know that any penalty from a mortgage we arrange for you is not only fully spelled out to you, but we will show you that our penalties are much much lower than any of the banks’ penalties which are sometimes as much as triple ours.   

Folks experts in our industry are starting to speak out to expose such practices and recently have even stated that bank mortgage penalties are bordering on criminal. See the Criminal Code sections 380.1 and 380.1 (1). Yes it’s that serious. 

Please do not leave yourself exposed to such a potential negative consequence. Look out for the fine print or better yet call us first for your next mortgage need.  

We are your WATCHDOG when it comes to mortgages.