Get the truth behind mortgage penalties

When a homeowner breaks their contract before the term of the mortgage is up, they will be subject to a mortgage penalty. Breaking a contract can happen for many reasons, but the most common is selling your home or for refinancing. Mortgage penalties depend on what interest rates are doing at the time you break your contract and they can depend on each bank. If mortgage rates are lower than the rate you have, you will be charged an interest rate differential penalty, if mortgage rate are higher than you currently have, you will be charged 3 months interest of your current balance. Check out our posts explaining the calculation for these penalties.

Where things can get tricky is not all banks use the current rate to calculate penalties, some use their posted rate which is often much higher. Clients are often unaware of the large penalty they are about to be charged. At Tekamar we try not to place clients with lenders who hide sneaky fees and penalties. We are keen on full transparency and want our clients to feel comfortable with their mortgage. When we are deciding where to place a mortgage, expensive penalties is something we consider and try our best to avoid!