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Mortgage penalty calculations.. More important than the interest rate.

greedy banker


You bought a home…  you need a mortgage.. what’s the first question you ask your Banker?  “what’s your best interest rate?”.  And the second question is usually, “what product should I choose?”.

Almost no one asks about Mortgage Penalties or how they are calculated.  After all, how often does anyone have to pay a penalty, right?   WRONG!   $10,000, $20,000, $30,000 and higher.  This is how much penalties can add up to… these are real numbers.   And guess what?  This isn’t some unknown bank or small lender.. These are coming from the BIG SIX BANKS.!!

Here’s a little known stat…. “Canadians change their mortgage every 3 years, on average”.  Ask anyone that’s owned a home before.  Chances are, they’ve had to deal with a mortgage penalty at some point..  and for most of them, it’s an embarrassing subject.   After all, who wants to admit to being the victim?  Check out the stats…


The average Canadian takes between 12 and 18 years to pay off their mortgage.   The most popular product is still a 5 year fixed rate (even though it’s usually NOT the best product to be in.. but that’s a discussion for another article).  We also change our mortgage or move every 3 years (these are real stats).

This means, chances are, we will be paying off our mortgage mid-term, at some point in our lives.  It’s not “if” but “when”.   And as I’ve discussed on this site in the past, penalties can add up to ridiculous amounts..  $10,000, $20,000, $30,000 and more!  Read this Mortgage Penalties exposed…. an in-depth study reveals unjust penalties. if you want to understand how penalties work.


There’s some things you can do to avoid these inflated penalties…

  1. Find out how your Bank calculates their penalties.   (This can actually be quite complicated…if you need help understanding, speak with your mortgage broker.)
  2. Understand that penalties are NOT calculated the same by all Banks or Financial Institutions.
  3. There are better Lenders out there.  Lenders that DON’T use an inflated prepayment penalty formula to calculate your penalty.
  4. Ask what the best product is to avoid or minimize your penalty.
  5. Speak to an unbiased mortgage professional.  Contact an experienced Mortgage Broker.
  6. Remember, your banker can only ever offer or sell their own brand of products.   It’s impossible for them to give unbiased advice.

Should you know how a mortgage prepayment penalty is calculated?  You better.  It’s the single largest expense that most of us will need to deal with.   It’s more important than the interest rate.  I’ll repeat that..  It’s more important than the interest rate.

Your best interest is my only interest.   I reply to all questions and I welcome your comments.  Like this article?  Share with a friend.

Steve Garganis 416 224 0114

Steve Garganis View All

As an industry insider, Steve will share info that the BANKS don't want you to know. Steve has appeared on TV's Global Morning News, CBC's "Our Toronto" and The Real Life TV show. He's also been quoted in several newspapers such as the Globe and Mail, The Toronto Star, The Vancouver Sun, The Star Phoenix, etc.

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