Mortgage Guide: Prepayment Penalties

The Jump Realty Mortgage Guide carries on! We’ve talked a lot about getting into your mortgage and making sure you understand what you are getting into. Let’s move forward. You and your Windsor REALTOR® searched Windsor homes for sale and viewed all sorts of houses for sale in Windsor. You found the right home, placed an offer, got it accepted, and that mortgage pre-approval went through. Now closing day has come and gone and you’ve moved in. That means it’s time for those mortgage payments to start coming out of pocket! You may be tempted to try and pay it off as quickly as you can, but beware of penalties. Our next section of the mortgage guide will cover the ins and outs of prepayments and possible penalties.

Let’s talk today specifically about what a prepayment penalty is. A prepayment penalty is a fee that your mortgage lender could charge you under a number of circumstances when trying to pay down your mortgage.

Some things you could do to trigger a charge could be:

- If you pay more than the amount of additional funds you can contribute toward your mortgage.

- If you break your mortgage contract altogether.

- If you transfer your mortgage to another lender before the end of your current term.

- If you pay back your entire mortgage before the end of your term. Note, this may also include when you sell your home.

Depending on your lender, these fees or charges may also be called prepayment charge, prepayment penalty, or breakage cost. However, if you have an open mortgage, you can make a prepayment or lump-sum payment without paying a penalty.

It is important to read your mortgage contract and understand when you can make prepayments or lump sum payments without penalty. Prepayment penalties can end up costing you thousands of dollars that you may not be prepared for.

For more information on prepayments check out this resource from the Financial Consumer Agency of Canada, HERE.

Here at Jump Realty our agents will give you honest advice on what course of action is best for you in their professional opinion and will always put taking care of your best interests first! With offices in Windsor, Tecumseh, Kingsville, and Chatham, no matter where you are, a Jump agent is ready to help. Please contact us for any housing needs and let us give you a better real estate experience!