12/12/2022
Payouts of mortgages with term remaining almost always include a payout penalty. In the case of a variable rate mortgage this is normally a 3 month interest penalty, and typically not overly painful.
Fixed rate mortgage payouts can instead be the Interest Rate Differential (IRD). The IRD is the difference between the current interest rate from the bank you are paying you, versus the fixed rate of your mortgage. In the case where interest rates have risen dramatically, the bank may instead use the 3 month interest penalty if that amount is higher.
The IRD penalty can be quite large compared to the 3 month interest penalty but the amount can be mitigated by making your annual prepayment to your mortgage before paying it out. Most mortgages allow for a 10-30% annual prepayment, the specific amount will be found in the terms of your mortgage. If you cannot afford to make a prepayment, that's where mortgage brokers can help tremendously. We can reach out to businesses and individuals who can lend you a prepayment and collect a fee, saving you potentially thousands of dollars once all the fees and penalties are calculated in paying out your mortgage.
That is one more reason to come to us to help you with your mortgage refinance.
