It seems to be commonly known that if you break your mortgage before the end of your term, for any reason (i.e. refinancing, transferring to another lender, selling), that you will be subject to a penalty. What appears to not be so commonly known is that mortgage terms can vary greatly (especially with regard to penalties) and, as such, the penalty to break your mortgage before the end of the term might not cost anything, it could cost as little as a few hundred dollars or it could cost tens of thousands of dollars!  Breaking your mortgage before the term is up can be a really great idea.  But, does it makes sense?  Let’s take a look see …

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[span class=”font-size-16″]Do you know what the penalty would be to break your mortgage?[cspan] [span class=”font-size-24″]

Did your bank, mortgage broker or lawyer explain it to you when you were signing your mortgage documentation?


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So, did you come here for the math? Didn’t think so! We will happily cover off the formulas with anyone that needs or wants to discuss this further. For now, please just know that some banks can charge 4x more than others just by tweaking the formula ever so slightly.

Um, what?


Sadly, it’s true.

So why would anyone break their mortgage early? Banks already take so much in interest and fees, don’t they? Here are the most common reasons for breaking a mortgage before the term is up (and there are some excellent reasons!):

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In other words, breaking your mortgage before the term can be a great move even if you have to pay a penalty! Do not let a penalty stop you from contacting us if, for instance, you’re thinking about refinancing. You may be able to get rid of all of your debt while putting money in the bank for safe keeping while paying less each month. We see it all the time … and nothing makes us happier than helping clients keep their hard-earned money while paying down their mortgage faster … with no debt t’boot!

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Moreover, a clients’ lawyer should explain all of the terms and conditions.   The bank, as well, should cover all terms and conditions with a client beforehand. It is the clients’ responsibility to know what they are signing; however, sometimes, a client can be very emotionally invested in the property and/or the circumstances and they may only skim over the details. They may not ask questions at all, and they might not read the contract. Many people are heavily focused on the interest rate only as well. The terms of the mortgage are just as important. Here is a wonderful idea … call us!

Let’s go back to the penalty for a min.  The details of the penalty can usually be found in your mortgage commitment or elsewhere in your mortgage package. Perhaps not so shockingly (now), you will find it in the fine print. We’ve seen signed mortgage commitment documentation that contained blurbs like this:

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Now we all know that I’m a sucker for really catchy, albeit mildly snarky and barely grammatically correct euphemisms, so here goes: What the Sam Hell is that all about, exactly, hmm?

Here it is, for example, in noncommittal and yet highly informative plain ol’ English: if your mortgage balance was about $250,000.00 and there was about 2 years remaining in your term; and the five-year posted rate that was offered when you got your mortgage was about 5.25% and the current posted rate that most closely matches your remaining term is approximately 3.3ish%, then your penalty could be nearly ten thousand dollars. Take all the time you need. Digest that. Process. A-n-n-d…proceed.

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[span class=”font-size-16″]BIG PROVISO: Please, guys, we’re all friends here … don’t hold us to that dollar figure. [cspan] [span class=”font-size-24″]

You can see that I used ‘ish’ and ‘about’ and ’approximately’ in that last paragraph (and I would have thrown in a ‘kinda-sorta-maybe’ if I’d had the chance). I did that because the only way to know, with 100% certainty, what your penalty would be is to discuss it with your lender. A word to the wise: sometimes the lender representative gets it wrong.  They shouldn’t, but it has been known to happen. Spoiler alert.


So friends, the message is this (and I cannot stress it enough): please read all mortgage documentation thoroughly and if you don’t understand something ask for clarification because penalties can vary, greatly.

Oh and hey, did I mention that we are always available to answer your questions? We are here to find the mortgage product that best suits your current and future needs so call, email or contact us with the form to the right of this page.  If you currently have a mortgage we will review it for free and with no obligation.  Together, let’s make sure that you are getting the lowest rates and best terms.

 …and don’t sign anything mortgage related until you contact us!

Talk soon!

Roy Perreault, Operations Manager, Mortgage Coodinator – The Mortgage Centre | Your Money Matters.


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