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11 Mar

Big Bank Penalties

General

Posted by: Tammy Poirier

What does your current mortgage holder charge you for a penalty?

Did you know that “big banks” calculate their pre-payment penalty differently than some other lenders?

Did you know that the average Canadian breaks or refinances their mortgage after 3 years, but most take out a 5 year term?

This could mean thousands of dollars in pre-payment penalty charges!

Here’s the difference; if you had your mortgage with a “big bank” they would charge your penalty based on the “Posted Rate” at the time you took out your mortgage. Well, 3 years ago (April 2012), that posted rate was 5.44%, even though you may have gotten a 3.49% interest rate (which most lenders were offering at that time).

On a $250,000 mortgage that would mean a penalty of $13,250 whereas other lenders would charge you a $3.500 penalty! That’s almost $10,000 more! That’s a lot of money that comes out of the equity of your home. What could you do with $10,000?

If you are thinking of refinancing your home or purchasing a new one. Talk to a trust mortgage professional so that you can get the best product for your needs. It’s not always about rate, it’s about what your long-term goal is.