So back to that penalty issue… have you wondered how some lenders charge such a high penalty when the mortgage term is almost over? This is an obvious retention tool the banks leverage to keep you on their books!
One of the many considerations we have when finding you the best mortgage is how they calculate penalties, as the market and your needs can easily shift throughout the term of your mortgage.
Do they charge a reinvestment fee as well? Do they have hidden clauses about firm sales? Do they charge a premium on top of the interest rate differential (IRD)?
Below are two examples of how lenders are calculating penalties. Which one would save you the most amount of money not only when you first get a mortgage, but also if you need to make a change? This is one of the many advantages of having our team help you without bias to understand the different available options and the terms lenders use to make more money from borrowers. We help you keep your hard-earned money in your pocket.
At the Angela Calla Mortgage Team, we first look to place your mortgage with a lender that does not use posted rates!
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QUICK PENALTY CALCULATOR LENDER Broker Lender arranged by Angela Calla Mortgage Team |
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APPLICABLE IF CLIENT NOT TAKING A REPLACEMENT MORTGAGE |
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Client Current Rate |
4.19% |
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Posted Rate Nearest to Months Remaining (eg. 16 months = 1 yr term) |
3.09% |
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Initial Discount Granted Off Posted |
0.00% |
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Differential |
1.10% |
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Remaining Balance |
$229,000 |
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Remaining Months |
16 |
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Penalty Amount Calculation Steps |
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Remaining Balance x Differential |
$2,519.00 |
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Remaining Balance x Differential / 12 |
$209.92 |
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Remaining Balance x Differential /12 x Remaining Months |
$3,358.67 |
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Reinvestment Fee of $300 (not applicable with Dominion Mortgage) |
$0.00 |
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TOTAL APPROXIMATE PENALTY |
$3,358.67 |
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QUICK PENALTY CALCULATOR LENDER Bank Mortgage obtained directly from borrower |
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APPLICABLE IF CLIENT NOT TAKING A REPLACEMENT MORTGAGE |
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Client Current Rate |
4.19% |
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Posted Rate Nearest to Months Remaining (eg. 16 months = 1 yr term) |
3.09% |
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Initial Discount Granted Off Posted |
1.50% |
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Differential |
2.60% |
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Remaining Balance |
$229,000 |
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Remaining Months |
16 |
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Penalty Amount Calculation Steps |
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Remaining Balance x Differential |
$5,954.00 |
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Remaining Balance x Differential / 12 |
$496.17 |
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Remaining Balance x Differential /12 x Remaining Months |
$7,938.67 |
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Reinvestment Fee of $300 (not applicable with Dominion Mortgage) |
$300.00 |
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TOTAL APPROXIMATE PENALTY |
$8,238.67 |
Angela Calla, AMP
Dominion Lending Centres-Angela Calla Mortgage Team
Host of The Mortgage Show Saturdays at 7pm on CKNW AM980
Phone: 604-802-3983 Fax: 604-939-8795
“An introduction to someone you care about is a big responsibility…it’s also the biggest compliment a client can give us & it’s not taken lightly. We pledge to treat everyone that is referred to us with the utmost respect & professionalism”.
Reach my Team Chris Adkins & Denzil Anderson at 604-939-8777 & callateam2@dominionlending.ca