If you have a closed mortgage at a fixed rate, and you want to get out early, be prepared to pay a high penalty. The cost may be many thousands of dollars.
Most mortgages have a clause that says premature cancellation requires paying three months’ interest or an interest rate differential (IRD), whichever is greater. Most closed fixed-rate mortgages have a prepayment penalty that is the higher of 3-months interest or the IRD. Most variable-rate mortgages do not have IRD penalties.
The IRD is a compensation charge that may apply if you pay off your mortgage prior to the maturity date, or pay the mortgage principal down beyond the amount of your prepayment privileges.
The IRD is based on:
Below are links to calculators:
[1] Let’s you estimate your mortgage penalty. Courtesy of Royal Bank
CLICK HERE https://www.rbcroyalbank.com/cgi-bin/mortgage/tools/prepayment/prepayment-charge-calculator.cgi/start
[2] How much interest can you save if you refinance your mortgage?. Courtesy of Funds2Go NOTE: Check the menu bar for more calculators!
CLICK HERE http://funds2go.ca/java/CAShouldIRefi.html
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