Why do I need to know about Interest Differential Penalties?
Blog by Diane Cardoso | April 22nd, 2014
Breaking a mortgage is not a minor issue when you consider 9% of borrowers end up refinancing their mortgage before the term is up, according to the Canadian Association of Accredited Mortgage Professionals. Know before you buy a home!! Ask pertinent questions of your banker or mortgage broker abour the mortgage penalties in advance of signing your documents. If you have an "open" mortgage, there are no penalties to pay, but usually the interest rate is a bit higher. The penalties on a closed variable rate mortgage are typically 3 months interest cost. If you lock in your rate, the penalty is usual the greater of three months interest or what is called the interest rate differential and how that "IRD" is calculated is the real sticking point and can be very costly.