TimLacroix
07-22-2014, 01:58 PM
** Mortgage Penalty Shock (http://cgymortgage.com/blog/Mortgage+Penalty+Shock%3A+Some+tips+to+help+soften+the+blow) **
Recently I have dealt with many Beyonder's who have had penalty challenges... primarily from the banks.
The typical shock is that more times than not, the penalty is IRD (Interest Rate Differential) with the bank. Reason for this is that the mortgage rates (in most cases) are based on a discount and therefore the discount factor is used to determine the penalty.
Example: 4.79% is todays posted 5 year rate... the offer is 2.99%... (discount is 1.8%) which matches most other broker or lenders. Assuming you break your mortgage with 3 years left... the bank will use the 3 year posted rate for calculations which today would be 3.75%.
Read More (http://cgymortgage.com/blog/Mortgage+Penalty+Shock%3A+Some+tips+to+help+soften+the+blow)
Lets assume $250,000 mortgage remaining:
Standard 3 month would be approx. $1,868.75 penalty
Bank IRD would be approx. $7,799
They are a couple of ways to avoid the penalties being high:
1 - Go Variable - the unfortunate thing is that variable is not for everyone and you need to qualify for it
2 - Talk to a broker and discuss the other lenders options
Not every rate is equal and neither is every lender... a strategy and solution go a long way...Read More (http://cgymortgage.com/blog/Mortgage+Penalty+Shock%3A+Some+tips+to+help+soften+the+blow)
Recently I have dealt with many Beyonder's who have had penalty challenges... primarily from the banks.
The typical shock is that more times than not, the penalty is IRD (Interest Rate Differential) with the bank. Reason for this is that the mortgage rates (in most cases) are based on a discount and therefore the discount factor is used to determine the penalty.
Example: 4.79% is todays posted 5 year rate... the offer is 2.99%... (discount is 1.8%) which matches most other broker or lenders. Assuming you break your mortgage with 3 years left... the bank will use the 3 year posted rate for calculations which today would be 3.75%.
Read More (http://cgymortgage.com/blog/Mortgage+Penalty+Shock%3A+Some+tips+to+help+soften+the+blow)
Lets assume $250,000 mortgage remaining:
Standard 3 month would be approx. $1,868.75 penalty
Bank IRD would be approx. $7,799
They are a couple of ways to avoid the penalties being high:
1 - Go Variable - the unfortunate thing is that variable is not for everyone and you need to qualify for it
2 - Talk to a broker and discuss the other lenders options
Not every rate is equal and neither is every lender... a strategy and solution go a long way...Read More (http://cgymortgage.com/blog/Mortgage+Penalty+Shock%3A+Some+tips+to+help+soften+the+blow)