Mortgage Experts: Mortgage pre-payment penalties?

[Pacman]

I'm curious about this, as there seems to be a lot of conflicting information out there. I know there are some experts on here who may shed some light on this.

Assume you are on a restrictive type of mortgage ( fixed, closed mortgage, 5 year term)

Let's say you take advantage of the pre-payment schemes the bank offers you (doubling payments, increasing payments by 10% each year, 10% lump sum payments once a year, accelerated weekly payments etc) and you end up paying off the mortgage before the end of the 5 year term.

Do you get charged a penalty for paying off the mortgage early, even though you are simply following and taking advantage of the banks payments methods?

I understand the banks charging penalties for someone who walks in, makes one massive lump sum payment to get out of the mortgage, and then goes and gets another mortgage for a lower interest rate somewhere else....

Pac

[G]

I am in your exact situation. The second time I renewed my mortgage I said please make the payments enough so that the mortgage will be paid off by the end of the term.

5 year closed fixed at 4.26%



I have taken advantage of the increasing payments and manage to knock 9 months off the 5 year term. ATB says there is no fees or penalties for as long as I have stayed within what is allowed.

[silvercivicsir]

as long as you keep within their rules, you are fine, no penalty for paying out your mortgage, before the 5yr term is up.. (ie, TD allowed a 15% max lump sum per year).. Unless your maxing your lump sum every year, and maxing out the payments, it's unlikely you will pay off your mortgage within 5 yrs..

[Pacman]

Originally posted by G
ATB says there is no fees or penalties for as long as I have stayed within what is allowed.

That seems logical to me. It seems unfair to have to pay a penalty if you have played the rules and take advantage of any schemes they offer you.

I've asked a few people at my branch and the standard answer seems to imply that there is a penalty if you pay off the loan early.

[G]

Are you sure they didn't misunderstand the question? Maybe they think you are going over what is allowed to pay it off. It makes zero sense to me to be allowed to make extra payments but get penalized for it.

[Pacman]

Originally posted by G
Are you sure they didn't misunderstand the question? Maybe they think you are going over what is allowed to pay it off. It makes zero sense to me to be allowed to make extra payments but get penalized for it.

I was pretty clear about it when I asked the question. This was at the brand and I called into the 1800 number as well.

I just got off the phone with them and they confirmed what everyone else is saying.......no penalty as long as you don't go over.

[G]

Good to know...the end is going to be so sweet.

[TimLacroix]

That is correct, there is no penalty if you pay-off your mortgage with the contracted term as long as you have followed the pre-payment privileges!