Mortgage Brokers Explain How To Break Your Mortgage

Breaking your mortgage and the penalties associated with it is the topic we tackle this week. We had three callers, along with Iain, explain their current mortgage situation and what they face to get out of it. As you’ll hear, sometimes the penalties are minimal and your lender will try to hide that from you, but other times it is substantial. Have a listen to this episode to learn how the penalties get calculated yourself.

There is so much to take away from the scenarios these callers are facing. As long as you have a fixed-rate mortgage, the break penalty calculation will always remain the same:

Step 1: Calculate the discount you received from your bank by subtracting the rate they gave you from the 5-year fixed posted rate at that time.

Step 2: Find the difference between the current posted rate you’d pay for a mortgage to finish your term and the discount you received.

Step 3: Calculate the Interest Rate Differential (IRD) by taking the difference between the rate you received and the step 2 difference.

Step 4: Divide the IRD by 12 to get the Monthly IRD.

This is what the bank wants to recover from you from leaving your deal early. Multiply the monthly IRD by the remaining balance and the number of months remaining on your term to get your penalty to break. If you don’t want to take the time to calculate this, no problem. Cannect will do it for you. Just give us a call and we’ll let you know if the numbers work for you to save long-term.

Podcast Notes:

0:00 - Intro
2:02 - Iain tells the story about his break penalty.
5:45 - Marcus explains why it is best to have various financial products from various banks.
8:25 - Calculating mortgage penalties.
11:39 - Daniel calls in to discuss his mortgage penalty.
23:00 - Josh calls in to discuss his mortgage penalty.
31:30 - Additional tricks and tips for Josh’s situation.
34:58 - Marcus explains his recommendation of Mortgage Financial Corporations.
36:21 - Sandy calls in to discuss switching away from her current Scotiabank mortgage.