Paying a Mortgage Penalty to Lower my Current Rate?

Key Take-Aways

This is an incredibly popular question in today’s market with interest rates at an all time low. Many Canadians have interest rates close to 3% or above and are seeing the ultra low 2% rates available on line for mortgages today.

Should I pay out my penalty and move to a lower rate of interest?


There are four key pieces of information that your mortgage professional should require in order to provide you with an accurate answer:

1.    What is your current mortgage balance?

2.    What is your current rate of interest?

3.    How long is remaining in your current mortgage term?

4.    What is the penalty that your institution is quoting you today?

With the above information your mortgage professional can then run the math to determine whether or not you are saving enough money monthly in interest cost to make up the cost of the penalty as well as the legal costs to re-register your new mortgage.

Sometimes the information is very cut and dry as penalties can be very large depending upon who your existing lender is and what rate of interest you currently have.

A Pilot mortgage professional can assist with helping to determine the best course of action, but it is important to keep in mind that no one has a crystal ball as to what future rates might look like.

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