Avoiding the Mortgage Refinancing Penalty

If you would like to refinance your mortgage without the penalty payment, RealEstateLawyers.ca has the answer.

Three Months Interest

The penalty is the equivalent of three months of interest on your current mortgage principal. This penalty can apply to both variable and fixed mortgages.

How to calculate it: 

 

\[
\begin{bmatrix}
\frac{Mortgage\,Principle*Original\,Interest\,Rate}{12}
\end{bmatrix}\ast\,3
\]

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Interest Rate Differential

The penalty is the amount of interest lost if your lender were to flip, lending the funds at today’s rates.

How to calculate it:

\[
\begin{bmatrix}
Original\,mortgage\,rate-current\,mortgage\,rate
\end{bmatrix}\ast

\begin{bmatrix}
\frac{Mortgage\,Principle*Original\,Interest\,Rate}{12}
\end{bmatrix}\ast\,months\,remaining\,in\,current\,term
\]

The penalty is the amount of interest lost if your lender were to flip, lending the funds at today’s rates.

How to calculate it:

Minimize your refinance penalty by taking advantage of pre-payment options.

Most mortgages come with prepayment options that allow you to either a. contribute a lump sum against your mortgage each year and/or b. increase your monthly payment.

Either will give you the ability to decrease your mortgage principal and therefore your penalty. For various reasons, it’s a great idea to take advantage of either or both of these options.

Need to learn more about mortgage refinancing?

For many property owners across Ontario (and globally), mortgage refinancing is the most accessible option to either tap into their wealth or consolidate debt. RealEstateLawyers.ca LLP offers FREE remote signing services with our secure conference software so that you can book and attend appointments from the comfort of your home. At Real Estate Lawyers.ca LLP, we make real estate transactions simple and service ALL of Ontario. Contact us today to learn more about flat rate fees!
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