Homeowner’s devastated after being hit by a $17,000.00 mortgage penalty by their bank
Most home buyers have no idea the size of penalty they may have to pay if they need to get out of their mortgage early.
A couple wanting to end their five-year fixed rate mortgage early were surprised when their bank told them there would be a $17,000.00 penalty to do so. The couple was under the assumption that their penalty would only be three months interest which would work out to be less than $4,000.00. Unfortunately this was not the case; the current mortgage product they held with their bank had the right to calculate a penalty using either three months interest or Interest Rate Differential (IRD).
Interest Rate Differential can be the difference of thousands of dollars in penalty fees. It is a complicated calculation using principal owing; month’s remaining on the mortgage’s term, and a comparison of what the interest rate you are currently paying versus the rate the bank would charge for the remainder of the term.
It is important to discuss your mortgage options with a professional, contact one of our mortgage brokers today!