Mortgage penalty calculator – MoneySense

When you’ve got a closed mortgage and resolve to interrupt your mortgage contract earlier than the agreed-upon time period has expired, you’ll probably should pay a prepayment penalty price. A mortgage penalty calculator will help you determine precisely how a lot these charges can be and can make it simpler to know whether or not it’s value it to interrupt your present mortgage contract early.

What’s a mortgage penalty? 

Once you efficiently apply for a mortgage, you and your lender conform to a time period—the size of time your contract is in impact, which may vary from a number of months to 5 years or extra. If you should break your mortgage contract earlier than the time period is up, your lender will normally cost a penalty price. The price is usually often known as a mortgage prepayment penalty. You might be charged a prepayment penalty if: 

  • You make a bigger further fee in the direction of your mortgage than your contract permits
  • You resolve to go along with one other mortgage supplier earlier than your mortgage time period expires
  • You pay again your complete mortgage quantity earlier than your time period ends (together with via the sale of your private home) 
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What do mortgage penalties price? 

The mortgage penalty calculator estimates how a lot it could price you to interrupt your mortgage early. There are a selection of things that decide how a lot of a penalty you’ll should pay to finish your mortgage contract earlier than the time period ends, together with:

  • Your present mortgage supplier and your province or territory of residence
  • When your present mortgage began and the unique time period of the settlement
  • The kind of price (mounted or variable)
  • Your current mortgage rate of interest
  • The steadiness remaining in your present mortgage

Enter the data above into the mortgage penalty calculator to get an concept of what you would possibly pay in penalties. Observe that the quantities are estimates primarily based on the lender, mortgage phrases and different related particulars. 

One of many key elements figuring out how a lot you’ll pay in penalties is whether or not your mortgage has a variable or mounted price. When you’ve got a variable-rate mortgage, you’ll more than likely pay three months’ curiosity in your mortgage steadiness. When you’ve got a fixed-rate mortgage, the penalty may be calculated two alternative ways, and you’re prone to pay the upper of the 2: both three months’ curiosity in your mortgage steadiness, or what’s often known as the rate of interest differential (IRD)—a penalty primarily based on the distinction between your present mortgage price and the speed the lender would use if lending the funds at present. 

When is it value paying the penalty? 

No matter quantity the mortgage penalty calculator offers you, remember the fact that in some circumstances, it could be beneficial to interrupt a mortgage contract. With the report low charges Canada is experiencing, you might save hundreds of {dollars} even while you think about your penalty price. 

The necessary factor is to calculate how a lot you’ll should pay in penalty expenses and examine it to what you possibly can save over the course of your mortgage. Doing the maths is one of the simplest ways to make sure you make an knowledgeable and financially good move concerning whether or not or to not break your mortgage contract.

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