What Is A Mortgage Penalty?

Mortgage Penalty

A mortgage penalty is the fee you pay if your break your mortgage contract early. This mortgage breakage penalty is intended to compensate for the lender’s lost revenue.

What Is A Mortgage Penalty?

What Is A Mortgage Penalty?

Reasons for breaking a mortgage

Breaking a mortgage is not uncommon in Canada. The Canadian Association of Accredited Mortgage Professionals reports that 9 per cent of Canadians choose to refinance their mortgages before their term is up. Switching mortgages for a better rate is one of the most common reasons Canadians break their mortgages, though selling your home during your mortgage term will also incur this penalty.

Before you consider breaking your mortgage, make sure you know what your penalty will be. In some instances, this penalty will be greater than the money you save with better mortgage rates. Some mortgages stipulate that you cannot break the mortgage unless you sell, so you will be unable to switch lenders at any time without paying the mortgage penalty.

It’s therefore essential that you consider all possible fees and penalties before you sign your mortgage. Can you make prepayments? You may also be charged a fee if you change lenders when your mortgage term matures, so be aware of this before signing.

How much is the mortgage penalty fee?

The mortgage penalty fee depends on what type of mortgage you have. If you have a variable rate mortgage, your penalty fee will be 3 months’ interest. If your mortgage is a fixed rate mortgage your fee will be either 3 months’ interest or the interest rate differential (IRD), whichever is the highest.

This IRD may be calculated over your mortgage term, or may be calculated on the amortization length of your mortgage. Make sure you know how your lender calculates the IRD when considering your mortgage options.

Open mortgages and closed mortgages

There are, of course, no penalties for breaking an open mortgage. Open mortgages have higher rates, but give you the financial flexibility of making prepayments and paying off your mortgage before the end of the mortgage term.

If you break a closed mortgage, you will have to pay a mortgage penalty. Closed mortgages cannot be repaid or refinanced until the mortgage makes maturity. But this lack of flexibility is tempered by the lower rates when compared to an open mortgage. The borrowers who want short term financing will still save money by choosing a closed variable rate mortgage and paying a penalty if they pay out early.

How to avoid a mortgage penalty

You have a better chance of avoiding mortgage penalty fees if you make sure your mortgage allows you to make prepayments. Many lenders permit borrowers to pay up to 20 per cent of their mortgage once per year. This sum is applied to your mortgage principal, and would reduce your interest costs. Always make sure to read your mortgage contract.

If you’re considering refinancing and would be subject to a mortgage penalty, you should take advantage of your prepayment options. Any mortgage penalty will be lower if your principal is reduced.

Prospect Sellers

If you are thinking of selling your house in Atlanta, contact us today, we can visit with you at your house and we will give you an honest opinion on what needs to be done before you list your house for sale. Our construction company can give you a free estimate on any work that needs to be done. Find out what is the current price of your home for free, contact our team at 770-309-6417  to get your free market analysis of your home and sell your home with confidence. Our agents can also help you determine if the house needs any repairs or updates in order to get the best possible price. Call us today.

Foreign Real Estate Investors: How to Purchase Real Estate in the USA?

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About Telmo Bermeo

Small Business Owner, specializes in marketing homes for sale in the Atlanta Area by using the most up to date Internet Marketing Tools.

Real Estate Broker serving the Atlanta Metro Area, for over 12 years. If you are planning to buy or sell your home in Atlanta, call Telmo Bermeo at 770-309-6417

Atlanta Real Estate Information

Here is the Top Real Estate Markets in Georgia

Atlanta Homes for Sale | Alpharetta Homes for Sale | Marietta Homes for Sale | Sandy Springs Homes for Sale | Decatur Homes for Sale Roswell Homes for Sale Lawrenceville Homes for Sale | Kennesaw homes for sale

Atlanta Homes for Sale

New Listing - 2 weeks online
$294,990
Single Family Home For Sale
Active
4
BED
4
TOTAL BATHS
2,635
SQFT
7107 Demeter Drive
Atlanta, GA 30349
Camden Manor Subdivision
$288,421
Single Family Home For Sale
Pending
3
BED
2
TOTAL BATHS
1,802
SQFT
673 Python Drive
Atlanta, GA 30349
Camden Manor Subdivision
$324,990
Single Family Home For Sale
Pending
5
BED
4
TOTAL BATHS
3,363
SQFT
7064 Demeter Drive
Atlanta, GA 30349
Camden Manor Subdivision
New Listing - 2 weeks online
$287,990
Single Family Home For Sale
Active
4
BED
4
TOTAL BATHS
2,635
SQFT
7067 Demeter Drive
Atlanta, GA 30349
Camden Manor Subdivision
$299,026
Single Family Home For Sale
Pending
5
BED
3
TOTAL BATHS
3,040
SQFT
7057 Demeter Drive
Atlanta, GA 30349
Camden Manor Subdivision
Price Change - 2 weeks ago
$284,990
Single Family Home For Sale
Pending
3
BED
2
TOTAL BATHS
2,200
SQFT
7044 Demeter Drive
Atlanta, GA 30349
Camden Manor Subdivision
$329,990
Single Family Home For Sale
Pending
6
BED
4
TOTAL BATHS
3,363
SQFT
663 Python Drive
Atlanta, GA 30349
Camden Manor Subdivision
$288,990
Single Family Home For Sale
Active
4
BED
4
TOTAL BATHS
2,635
SQFT
7027 Demeter Drive
Atlanta, GA 30349
Camden Manor Subdivision
$312,478
Single Family Home For Sale
Active
4
BED
3
TOTAL BATHS
2,544
SQFT
7014 Demeter Drive
Atlanta, GA 30349
Camden Manor Subdivision
$299,990
Single Family Home For Sale
Pending
5
BED
4
TOTAL BATHS
3,040
SQFT
7007 Demeter Drive
Atlanta, GA 30349
Camden Manor Subdivision
$289,990
Single Family Home For Sale
Active
4
BED
4
TOTAL BATHS
2,635
SQFT
6997 Demeter Drive
Atlanta, GA 30349
Camden Manor Subdivision
$4,000,000
Single Family Home For Sale
Active
7
BED
9
TOTAL BATHS
15,159
SQFT
4690 Thompson Road
Atlanta, GA 30349
 
$8,900,000
Single Family Home For Sale
Active
9
BED
14
TOTAL BATHS
26,000
SQFT
4965 Butner Road
Atlanta, GA 30349
 
$310,235
Single Family Home For Sale
Active
4
BED
3
TOTAL BATHS
2,443
SQFT
555 Dutchview Drive
Atlanta, GA 30349
WHISPERING WILLOWS Subdivision
Short Sale
$195,000
Single Family Home For Sale
Active
4
BED
3
TOTAL BATHS
2,639
SQFT
432 Hammock Loop
Atlanta, GA 30349
 
New Listing - yesterday
$277,303
Single Family Home For Sale
Active
3
BED
3
TOTAL BATHS
2,260
SQFT
3216 Camden Court
Atlanta, GA 30349
Kingsland Subdivision
New Listing - yesterday
$290,182
Single Family Home For Sale
Active
4
BED
4
TOTAL BATHS
2,545
SQFT
3217 Camden Court
Atlanta, GA 30349
Kingsland Subdivision
New Listing - 3 weeks online
$306,071
Single Family Home For Sale
Active
4
BED
4
TOTAL BATHS
2,525
SQFT
3208 Camden Court
Atlanta, GA 30349
Kingsland Subdivision
New Listing - yesterday
$280,112
Single Family Home For Sale
Active
3
BED
3
TOTAL BATHS
2,545
SQFT
7147 Glaspie Way
Atlanta, GA 30349
Kingsland Subdivision
$310,500
Single Family Home For Sale
Active
5
BED
3
TOTAL BATHS
3,033
SQFT
510 Dutchview Drive
Atlanta, GA 30349
WHISPERING WILLOWS Subdivision
New Listing - 3 weeks online
$310,089
Single Family Home For Sale
Active
5
BED
3
TOTAL BATHS
2,680
SQFT
3221 Camden Court
Atlanta, GA 30349
Kingsland Subdivision
$272,803
Single Family Home For Sale
Active
3
BED
3
TOTAL BATHS
2,260
SQFT
3204 Camden Court
Atlanta, GA 30349
Kingsland Subdivision
Open House 12/07 at 1PM
$280,508
Single Family Home For Sale
Active
5
BED
3
TOTAL BATHS
2,487
SQFT
3200 Camden Court
Atlanta, GA 30349
Kingsland Subdivision
$327,527
Single Family Home For Sale
Pending
5
BED
3
TOTAL BATHS
3,077
SQFT
455 Dutchview Drive
Atlanta, GA 30349
WHISPERING WILLOWS Subdivision
$239,900
Single Family Home For Sale
Pending
4
BED
3
TOTAL BATHS
1,972
SQFT
400 Dutchview Drive
Atlanta, GA 30349
WHISPERING WILLOWS Subdivision
$271,053
Single Family Home For Sale
Active
4
BED
3
TOTAL BATHS
2,260
SQFT
3225 Camden Court
Atlanta, GA 30349
Kingsland Subdivision
$278,990
Single Family Home For Sale
Active
4
BED
3
TOTAL BATHS
2,522
SQFT
3220 Camden Court
Atlanta, GA 30349
Kingsland Subdivision
New Listing - 4 weeks online
$263,389
Single Family Home For Sale
Active
4
BED
3
TOTAL BATHS
2,122
SQFT
3235 Camden Court
Atlanta, GA 30349
Kingsland Subdivision
$286,258
Single Family Home For Sale
Pending
5
BED
4
TOTAL BATHS
2,487
SQFT
3247 Camden Court
Atlanta, GA 30349
Kingsland Subdivision
$271,500
Single Family Home For Sale
Pending
4
BED
3
TOTAL BATHS
2,487
SQFT
3239 Camden Court
Atlanta, GA 30349
Kingsland Subdivision
New Listing - 4 weeks online
$267,389
Single Family Home For Sale
Active
4
BED
3
TOTAL BATHS
2,122
SQFT
3243 Camden Court
Atlanta, GA 30349
Kingsland Subdivision
$267,389
Single Family Home For Sale
Pending
4
BED
3
TOTAL BATHS
2,108
SQFT
3251 Camden Court
Atlanta, GA 30349
Kingsland Subdivision
$268,789
Single Family Home For Sale
Active
4
BED
3
TOTAL BATHS
2,122
SQFT
7143 Glaspie Way
Atlanta, GA 30349
Kingsland Subdivision
$282,173
Single Family Home For Sale
Active
3
BED
3
TOTAL BATHS
2,260
SQFT
7139 Glaspie Way
Atlanta, GA 30349
Kingsland Subdivision
$245,700
Single Family Home For Sale
Pending
5
BED
4
TOTAL BATHS
2,404
SQFT
3492 Dacite Court
Atlanta, GA 30349
Flat Shoals Manor Subdivision
New Listing - a week online
$194,990
Single Family Home For Sale
Active
3
BED
3
TOTAL BATHS
6526 Beaver Creek Trail
Atlanta, GA 30349
College Heights Subdivision
New Listing - a week online
$205,490
Single Family Home For Sale
Pending
4
BED
3
TOTAL BATHS
6517 Beaver Creek Trail
Atlanta, GA 30349
College Heights Subdivision
New Listing - a week online
$205,990
Single Family Home For Sale
Active
4
BED
3
TOTAL BATHS
6577 Beaver Creek Trail
Atlanta, GA 30349
College Heights Subdivision
New Listing - 2 hours online
$205,490
Single Family Home For Sale
Active
4
BED
3
TOTAL BATHS
6509 Beaver Creek Trail
Atlanta, GA 30349
College Heights Subdivision
New Listing - a week online
$204,990
Single Family Home For Sale
Pending
4
BED
3
TOTAL BATHS
6522 Beaver Creek Trail
Atlanta, GA 30349
College Heights Subdivision
New Listing - a week online
$257,990
Single Family Home For Sale
Active
5
BED
3
TOTAL BATHS
6538 Beaver Creek Trail
Atlanta, GA 30349
College Heights Subdivision
New Listing - a week online
$218,990
Single Family Home For Sale
Pending
5
BED
3
TOTAL BATHS
6513 Beaver Creek Trail
Atlanta, GA 30349
College Heights Subdivision
New Listing - a week online
$217,990
Single Family Home For Sale
Active
5
BED
3
TOTAL BATHS
6518 Beaver Creek Trail
Atlanta, GA 30349
College Heights Subdivision
New Listing - a week online
$258,990
Single Family Home For Sale
Pending
5
BED
3
TOTAL BATHS
6566 Beaver Creek Trail
Atlanta, GA 30349
College Heights Subdivision
New Listing - a week online
$218,990
Single Family Home For Sale
Pending
5
BED
3
TOTAL BATHS
6521 Beaver Creek Trail
Atlanta, GA 30349
College Heights Subdivision
New Listing - a week online
$198,740
Single Family Home For Sale
Active
3
BED
2
TOTAL BATHS
6505 Beaver Creek Trail
Atlanta, GA 30349
College Heights Subdivision
$162,490
Single Family Home For Sale
Pending
4
BED
3
TOTAL BATHS
1,800
SQFT
6690 Mancha Street
Atlanta, GA 30349
Heritage Park Subdivision
$169,490
Single Family Home For Sale
Pending
4
BED
3
TOTAL BATHS
2,000
SQFT
6683 Mancha Street
Atlanta, GA 30349
Heritage Park Subdivision
$167,490
Single Family Home For Sale
Pending
4
BED
3
TOTAL BATHS
2,000
SQFT
2205 Creel Road
Atlanta, GA 30349
Heritage Park Subdivision
$174,490
Single Family Home For Sale
Pending
5
BED
3
TOTAL BATHS
2,217
SQFT
6790 Mancha Street
Atlanta, GA 30349
Heritage Park Subdivision
$162,490
Single Family Home For Sale
Pending
4
BED
3
TOTAL BATHS
1,800
SQFT
6742 Mancha Street
Atlanta, GA 30349
Heritage Park Subdivision
$169,490
Single Family Home For Sale
Pending
4
BED
3
TOTAL BATHS
2,000
SQFT
6735 Mancha Street
Atlanta, GA 30349
Heritage Park Subdivision
$176,490
Single Family Home For Sale
Pending
5
BED
3
TOTAL BATHS
2,217
SQFT
2281 Creel Road
Atlanta, GA 30349
Heritage Park Subdivision
$162,490
Single Family Home For Sale
Pending
4
BED
3
TOTAL BATHS
1,800
SQFT
2273 Creel Road
Atlanta, GA 30349
Heritage Park Subdivision
$169,490
Single Family Home For Sale
Pending
4
BED
3
TOTAL BATHS
2,000
SQFT
2285 Creel Road
Atlanta, GA 30349
Heritage Park Subdivision
$167,990
Single Family Home For Sale
Pending
4
BED
3
TOTAL BATHS
2,045
SQFT
505 Hererra Street
Atlanta, GA 30349
Heritage Park Subdivision
$252,500
Single Family Home For Sale
Active
4
BED
3
TOTAL BATHS
3,006
SQFT
4244 Sublime Trail
Atlanta, GA 30349
Pittman Park Subdivision
New Listing - 3 weeks online
$234,420
Single Family Home For Sale
Active
4
BED
3
TOTAL BATHS
1,976
SQFT
5066 Rapahoe Trail
Atlanta, GA 30349
Parkway Villages Subdivision
New Listing - 2 weeks online
$230,965
Single Family Home For Sale
Active
3
BED
3
TOTAL BATHS
1,920
SQFT
5064 Rapahoe Trail
Atlanta, GA 30349
Parkway Villages Subdivision
New Listing - 3 weeks online
$232,920
Single Family Home For Sale
Active
4
BED
3
TOTAL BATHS
1,976
SQFT
5062 Rapahoe Trail
Atlanta, GA 30349
Parkway Villages Subdivision