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5 Mortgage Secrets

THE PENALTY COVER UP Mortgage Secret 3 of 5

mortgage Advisors Canada

Mortgage penalties are used when you end or even need to change the terms of your mortgage earlier than you’ve agreed to.

Breaking a mortgage could be for any of the following reasons:

  • need money to renovate your home
  • a change of job
  • you are going on maternity leave
  • got laid off
  • moving to a new home
  • need money to start investing in or starting a new business

Breaking your mortgage happens! All the above reasons are pretty common things that happen in life. When someone breaks their mortgage (which happens often), the bank charges them penalties.

85%

Of course, it’s extremely difficult to predict reasons for breaking your mortgage early, but it happens frequently. Statistics from CMHC suggest that 85% of Canadian mortgages are broken in the third year.

You know what they say… “stuff happens.” You may think you’re going to live in the house you’re in right now for 10 more years, but if “life” happens (and we see “life” happen ALL THE TIME), you need to be prepared.

If you need to break your mortgage, you will need to pay a penalty.

How much? Read on.

NOT ALL MORTGAGE PENALTIES ARE CALCULATED THE SAME WAY.

Most of the big banks base the penalty on the posted rate at the time when you signed your mortgage INSTEAD of your actual rate. This has a large impact on your penalty cost.

WHAT ARE THE PENALTIES FOR?

When you return the borrowed money earlier than agreed, the bank has to find another borrower for the remaining term. Since this is difficult to do at the same rate, banks use the penalty to cover their loss.

The posted rate at the time when you received your mortgage should have no impact on how much your penalty should be 3 years later. The only reason the big banks can continue to use this corrupt calculation is their large market share and consumer complacency.

The Big Banks hold 80% of the Canadian mortgage market, and until Canadians stand up and stop using them, they’re not going to change their policies.

In today’s fast-paced world it seems that the only real thing that remains consistent is the fact that everything changes, this should remind us that when we start making decisions today that we have the potential to affect us financially in the future that all factors should be considered.

Flexibility, now more than ever is extremely important! So although I am talking about things that may happen or consequences as a result of the situation that may occur, I feel that it’s more important to consider them and be prepared for them.

With mortgage rates being so close from bank to bank, it becomes much easier to select your next bank based more on its features and policies, than just the rate alone. And as a mortgage professional it’s my job educate you on the differences between the bank’s because trying to figure this out on your own would be extremely time consuming and redundant, as I have already done all of the research for you.

WANT THE EASIEST WAY TO FEEL CONFIDENT ABOUT YOUR MORTGAGE? WANT TO AVOID HAVING TO READ AND LEARN ALL THE FINE PRINT OF YOUR MORTGAGE? WE’VE ALREADY DONE THE HARD WORK FOR YOU.

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