For example, the prepayment penalty may be higher if you pay off your loan in 1 year than if you pay it off in 2 years. Variable-rate closed mortgage has fluctuating interest rates depending on market changes but a fixed mortgage prepayment charge andįixed-rate closed mortgage has a fixed interest rate throughout the loan term, but the estimated penalty is charged based on how long you've held the mortgage loan. Open-end mortgage – with a high-interest rate but no restrictions or prepayment penalty on how much or when you can pay off the loan Ĭlosed mortgage – with a low-interest rate and prepayment penalty Some different types of mortgage lenders offered with a prepayment penalty are:
We also have a mortgage payoff calculator that would help you follow the repayment schedule of your mortgage loan. The mortgage prepayment penalty calculator will help you decipher how much you may be charged. But mortgage lenders, especially in Canada, try to balance the effect of loan prepayments on their bottom line by offering different types of mortgage loans to make the mortgage contract attractive.
#Pterm for pay off mortgage registration#
That is why most lenders often include a mortgage prepayment charge or penalty clause in the mortgage loan contract to compensate for the economic costs.Īfter paying a registration fee and discharge fees to cover the paperwork of a mortgage process, the last thing you want is another fee to penalize you for paying off your mortgage sooner. So if a loan is prepaid and the interest is less, they rarely profit. On the one hand, they're glad a borrower did not default on the loan payment, but on the other hand, they have to forgo the interest they would have gained if the borrower had stuck to the original loan agreement.įurthermore, lenders insure mortgage loans by offering them as bonds to investors who are paid with some interest on the loan. Mortgage lenders have a love-hate relationship with these prepayments. When you prepay your mortgage, you make extra payments to the regular periodic (monthly, semi-monthly, biweekly, etc.) installments you are expected to pay. Input the details from your most recent mortgage loan documents into this mortgage penalty calculator, and you'll get your result.Ī mortgage prepayment penalty is an agreement between a borrower and a bank or mortgage lender regulating what the borrower can pay off and when. With the mortgage penalty calculator, you don't need to bother making these calculations manually. Usually, the estimated charge is whichever amount is greater between two calculations – the three months' interest on the amount you are prepaying or the interest rate differential (IRD) on the amount you are prepaying. You can read further here to learn about how the prepayment penalty or charge is calculated on your prepaid mortgage. But if you haven't, make sure you check it out now! If you're here, you've probably checked out the mortgage prepayment calculator, which deals comprehensively with how you can save money and pay off your mortgage in time without incurring any mortgage fees. Prepayment means paying off your mortgage faster than the initially agreed schedule. The mortgage penalty calculator helps you estimate the prepayment penalty or charge that would apply if you prepaid your mortgage loan.
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