In the last few months, I have discussed mortgage penalties with various individuals. With the recent plunge in interest rates, many fixed rate mortgage holders, have contacted their banks to find out what it would cost to break their mortgage term in pursuit of today’s much lower mortgage rates.
In some instances, it does make sense to break an existing mortgage rate, to move into a lower rate, but the challenge will most certainly come when you try to talk to your current lender about your mortgage penalty. Some of the individuals who approached their bank to find out about their penalty have told me about receiving conflicting information about the mortgage penalty amount as well as how the mortgage penalty was derived, from their own banks. There have been at least 100 comments and stories submitted in response to Ellen Roseman's columns in the Toronto Star about mortgage penalties and many clearly explain the frustrations they have had when trying to get their lenders to explain the penalty. If you are currently exploring a move to another lender, and you need to know what your mortgage penalty will be, the best way to do this is to ask your lender to provide you with the penalty amount in writing (do not accept a verbal quote).
Here below, is a template letter, which you can modify by inputting your own personal information: your name(s), address, mortgage loan number. Hand deliver this letter to your bank's branch manager, and you will receive a proper estimate, in writing. Remember that if your bank is using the IRD caluation (Interest Rate Differential Calculation), your mortgage penalty amount can change from day to day, as interest rates fluctuate but at least if you have the estimate in writing, you have something to work with.
(Your address here)
(Today’s date here)
(Name of your bank)
(branch address)
Attention: (name of branch manager, Branch Manager)
RE: Mortgage #: quote your mortgage number here
Dear (branch manager name here):
May I please have a current up-to-date “information only” payout statement, for my mortgage listed above, showing detail on what my penalty would be, should I decide to pay out the mortgage in full as of this date.
I would like to receive this information within a reasonable timeframe: 5 business days.
Please mail a copy of these statements, directly to my home address. I look forward to your prompt response.
Kindest Regards,
(Your legal signature here)
(Your name here)
This article written by Elizabeth Blair on November 29, 2010. Elizabeth is a Licensed Mortgage Agent with Mortgage Edge in Richmond Hill, Ontario. Elizabeth services mortgage clients in Mississauga and all over the Greater Toronto area.
You can contact Elizabeth directly by phone at (905) 510-5785
by email at eblair@mortgageedge.ca
or you visit any of her websites at:
www.missmortgage.ca
www.burlington-mortgage.ca
www.oakville-mortgage.com
www.streetsville-mortgage.ca
Elizabeth is licensed with the Financial Services Commission of Ontario and is also a Member of IMBA (the Independent Mortgage Brokers Association of Ontario) www.imba.ca
Lic # M08005880 / Brokerage Lic # 10680
Head office is located at: 15 Wertheim Court, Suite 210, Richmond Hill, Ontario, Canada.
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