Extreme Canadian Mortgage payout penalties – your mortgage professional should be able to explain these….

Your mortgage professional has a duty of care to you to fully explain the implications of your Canadian mortgage payout penalties.  With the major banks and trust companies, these are pretty standard with only a few exceptions that I have discussed here.  There are lenders that are a bit more niche, often specializing in self employed or credit challenged clients, these lenders have some very divergent payout rules, that in my experience are not always fully and properly explained to borrowers.  I have included below a quick guide:

• Home Trust: – these mortgages are fully closed for the term, this means that except for selling your home, you are stuck- unable to refinance or repay your mortgage for the entire term.  I have worked with borrowers who were not told this  and have basically realized they are “owned” by their lender for the remainder of their term
• Pro tip: only take a two or three year term so you have flexibility.  A five year term is the equivalent of getting caught smuggling drugs in Singapore – your are locked up and not going anywhere anytime soon.
• Equitable trust: – these mortgages are generally the least punitive and are available for repayment upon payment of the payout penalty of the interest rate differential (IRD) based upon the BOND rate. The use of the bond rate versus the current mortgage rate often adds a significant amount onto your payout cost.
• Pro tip: With an IRD calculation, the lower your remaining term the lower the penalty.  Pick a two or three year term.
• Bridgewater Bank: –