Harpreet’s perspective
Real questions. Real properties. Real numbers.
You got a five-year mortgage. Two years later, life changed. You're selling, refinancing, moving, consolidating debt, or you've found another financing strategy. Then somebody asks: ‘What's your mortgage penalty?’ And you say: ‘My what?’
This is why I care about mortgage terms when we're choosing the mortgage. A low rate is wonderful. But mortgages also have rules around things like prepayments, early payout and penalties.
How Is the Penalty Calculated?
The answer depends on your mortgage and lender. Different mortgage structures can have different penalty calculations and terms. That's why you should get an actual payout or penalty estimate from your lender when considering breaking the mortgage rather than relying on somebody's quick online calculation.
A penalty can materially change whether refinancing makes sense.
Include It in the Math
Imagine refinancing saves you $800 per month. Sounds fantastic. But what if breaking the existing mortgage costs $15,000? Now we need to understand how long it takes to recover that cost and whether the overall strategy still makes sense.
Maybe it does. Maybe waiting until renewal is smarter. Maybe another option exists.
Understand the Mortgage You Are Leaving
This is why I don't want to look only at the shiny new mortgage. We need to understand the mortgage we're leaving too. The cheapest mortgage today isn't necessarily the cheapest mortgage over your entire ownership journey. Sometimes flexibility has value. You just don't appreciate it until you need it.