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25 Aug

Flaherty proposes changes to business mortgage terms

General

Posted by: Angela Calla

Canada’s finance minister is proposing legislation that would make it easier for businesses to negotiate mortgages terms with lenders.

Finance Minister Jim Flaherty wants to tweak the Interest Act to reflect companies in all shapes and sizes more favourably.

Under the act, only corporations and joint stock companies can negotiate with lenders the penalty for paying off a long-term mortgage sooner than agreed.

All other mortgage holders must pay a mandatory penalty of three months of interest when they pre-pay the full amount of the mortgage.

“Some lenders are reluctant to provide financing to businesses not structured as corporations, such as partnerships or trusts, since the pre-payment penalty is limited to three months of interest,” Flaherty said in a release Monday.

“The government is proposing to modernize the Interest Act by broadening the list of business entities that can negotiate their own penalty. This will give all businesses an equal opportunity to get long-term financing.”

Flaherty has issued a consultation paper on the matter, inviting all stakeholders to comment.