Cory Kline, AMP
Mortgage Agent
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Your Mortgage Penalty Was How Much??

Updated Monday, July 13, 2015  ::  Views (2022)

Someone recently asked if I could describe the various penalties associated with breaking a mortgage prior to the maturity date.

Generally speaking, lenders usually use a 3 month interest penalty, or an Interest Rate Differential penalty (IRD). The penalty for breaking a fixed rate mortgage is usually the greater of 3 months interest, or the IRD (in some cases when it is very close to maturity, the 3 month interest penalty will be higher, but otherwise the IRD penalty is much higher than 3 months interest).

Variable rate mortgages usually use the 3 month interest penalty. Some variable mortgages offering lower rates, however, will use an IRD or, in some instances, are closed (you cannot break them) without a bona fide sale of the property. This is also the case for some niche fixed rate mortgage products.

It is in the IRD penalty where there can be vast differences from one lender to another.

The IRD penalty is based on 3 things:

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Your Mortgage Penalty Was How Much??
By: Daniel Lewczuk

If you, your family, or co-workers require guidance on current mortgage market trends, please call me, I am always available to help.
Cory Kline, AMP
Neighbourhood Dominion Lending Centres - Barrie Office
Cell / Text: 705-794-1283
Fax: 1-877-812-6190
Mortgage Agent, FSCO # M09001239
Brokerage FSCO Lic. # 11764

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