05/06/2025
A Better Way Mortgage Architects
Jerry Schindelheim
M09000270
6132228129
Understanding Mortgage Penalties
Many homeowners—especially those without a mortgage broker—don’t fully understand mortgage penalties. And I get it! Financing a home can be overwhelming. But if you're considering refinancing, selling, making a lump sum payment, or need a way out, read this first.
The most common mortgage penalty my clients encounter is a prepayment penalty. Did you know? Your lender doesn’t want their money back early! That’s because they earn guaranteed interest on the loan, helping them not only budget but also profit. Let’s go over the types of prepayment penalties:
Prepayment or Overpayment: If you make a lump sum payment on your mortgage or increase the regular payments by too much, you could be outside the terms of your mortgage agreement.
Transferring: If you move your mortgage to another lender before the end of your term, that is considered breaking the mortgage agreement you made.
Early Re-Payment: If you sell your home and pay off your lender with the proceeds, leaving you without a mortgage, that also breaks the agreement.
Breaking your mortgage for these—or any other reason—almost always results in financial penalties. The amount of the penalty that could be owed will be based on a few factors:
The amount of pre- or over-payment
Interest rates (existing and new)
The type of mortgage (open, closed) and the type of rate (fixed, variable)
How can you reduce or avoid prepayment fees?
The simplest answer is to wait until the end of your existing term to make changes. If that’s not possible, let’s review your circumstances:
Do you have a fixed or variable rate? If you have a variable rate and you’re breaking the mortgage in favour of a fixed option, first check to see if you can lock in a rate under your existing terms
Are you making a lump-sum payment? Review the terms of your mortgage to see what your annual prepayment allowance is. Most mortgages will let you make some fixed lump sum payments without any penalties
Penalties for non-payment
There’s also a flip side to penalties, which involves incurring a penalty because you’re making a late payment or missing payments.
You won’t be surprised that any payment received after the due date will incur a fee. Lenders will also report the missed payment to the credit bureau, which will impact your credit score. Before you miss a payment, the best thing you can do is to notify your lender (especially before it happens) and let them know. You can work together to defer a payment, skip a payment, or make other alternative arrangements.
If you’re with a lender that offers it, consider taking a ‘mortgage payment holiday’ and either skipping or deferring payments for a specific amount of time. Some lenders allow up to 3-6 months or possibly longer, depending on the circumstances.
If you have already missed a payment, you should make up that late or missed payment as soon as possible to avoid a quickly escalating situation.
When can penalties be worthwhile?
It is important to note that sometimes, paying a penalty can be worthwhile—especially if you're locked into a higher-rate mortgage and the savings from breaking it and securing a lower rate outweigh the penalty costs. I can help you with this determination! I can help you determine if this makes financial sense for you.
An alternative to mortgage penalties
If you’re likely to break your mortgage agreement, consider an open mortgage. This is a great short-term solution for anyone who has an inheritance coming up, is planning a move out of town, or perhaps getting married (or divorced) and planning to combine (or separate) assets. You regularly pay the mortgage as long as you need it, but when you sell the property—no worries. This option does typically come with higher rates, but the benefit is that there are no penalties to pay it off at any time.
Whatever type of mortgage penalty you might be facing, my best recommendation is to talk to me for expert advice. Do this before you make any commitments so we can go over the fine print and you can understand what you’re getting into! I always take the time to do this with my clients, and I would be happy to assist you also.
Home Upgrades to Boost Your Property’s Value
“Spring has a way of bringing everything back to life, even a broken heart—or a dated, messy house.” ~ Willie Nelson (roughly interpreted)
Spring is typically a busy season for the housing market in Canada. Whether you’re looking to sell or help your home bloom where it’s planted, these value-add ideas will be worth putting on your to-do list. We’ve sorted the chores by cost so you can consider your budget first and foremost.
Now, let’s get to work!
Under $100
Perhaps the best bang for your buck is to focus on the front of the house. A few inexpensive ideas are to paint the front railing, upgrade the mailbox, or change the numbers on your house. You’ll also get a lot of value from some yard maintenance, like raking, picking up the pinecones, cutting the grass, or planting a few flowers. Do you know why flowers are so popular? They have a lot of buds. 😉
Looking at the inside of the house, something almost all of us could benefit from is decluttering. Go through kitchen drawers and cupboards, closets, and even review the décor in your home. If you still have one of those tall vases with some wheat coming out of it, it’s time to let that go. While you’re scrutinizing every nook and cranny, make sure all the lightbulbs work—and replace any that are burnt out.
Under $500
This budget can get you pretty far if you’re willing to DIY some projects. For example, you could get some paint and supplies and paint a whole new colour into your home. Start with a room or even just an accent wall to make the project more manageable. Another option is to put a firepit in your yard. Seeing and using the space in a new way might make you fall in love with the home all over again.
Another option is to tackle some small upgrades, like new k***s on the kitchen drawers, replacing a toilet seat with an upgraded bidet, or even installing a new light fixture that brightens up a room. Some door handles might need replacing or you may even want to add some curtains or a window treatment to the most used rooms in your home.
Under $1000
Perhaps the biggest suggestion in this category is a professional cleaner. Having someone come in and truly scrub the baseboards, inside the oven, and all those other sneaky little places will make your house look instantly better. Be sure to make a list of what needs the most attention and prioritize the tasks when you hire the cleaner. You could also get your carpets professionally cleaned – they’ll both look and feel much better.
Another idea is to add some tech into your home, like a smart thermostat, lighting, or a camera-based security system. These can be relatively easy to install on your own which is a great way to save some money.
Under $2500
We’re going to start with an interesting one here, which is to upgrade your front door to a steel door. Based on the numbers online, you’ll make back 188% of the value at resale, so think of it as an investment.
If you’ve got hardwood floors, getting them refinished will make a big difference aesthetically in your home. If that’s not a direction you want to go, you could also upgrade the space with a high-quality area rug.
Under $5000
The first suggestion is to upgrade your bedroom closets to custom designs. Make the space more functional for the clothes, shoes, and accessories you have. It will not only make getting dressed easier, but the entire space will be easier on the eyes.
The second suggestion is to install a new garage door. Whether it’s a newly automatic door or simply a better-looking replacement, a new garage door has been shown to recoup 194% of its cost at resale. And if resale isn’t the direction you’re going, you can still use the new door and have your property looking better quickly.
Unrestricted budget
This next section is something you’re almost certainly better off hiring a professional to tackle. These are much more time and labour intensive, so be sure to research the cost and get quotes from professionals before launching into any of them. Here are a few suggestions:
Replace the roof. Speaking of roofs, do you know why the roof went to the doctor? It had shingles.
Redo the kitchen to modern design with new appliances like a gas stove, convection oven, double dishwasher, tech-heavy fridge, or other things you’ve had on your bucket list
Add an addition to the home with an office space
Replace windows with energy efficient ones and include window dressings
The bottom line here is that no matter how big or how small your budget is, there are plenty of things you can do to spruce up your home and either enjoy it more yourself or increase its value to a potential buyer.
