Hello, I did a calculation based on your details above. The difference in monthly payment is $62 per month based on 5 year term that is a savings of $3720... But the savings does not stop there. The remaining mortgage balance at the end of the 5 year term is different for both rates, the difference is an additional savings of $1610. So a total savings of $5330! As for the penalty to break with your bank they are the best source of info for this. Give your branch a call and ask them what is the penalty if I pay off my mortgage completely in 30 days from today. That number should be less than the savings you see above. For other readers if your interest rate is higher than the 3.6% you see in this question then the savings is higher as well. I switched a mortgage for a client who had a higher mortgage balance and was at 5.7% interest rate (the rate at the time 3 years ago) He was quoted a penalty of $13,000 to break from his bank, after doing the calculations he did break and pay the penalty because he saved $33,000 over the next 2 years in interest. He almost tripled his initial penalty. There is no investment product that can return this kind of money into your pocket short of loan sharking!! The proof is in the numbers so I encourage anybody who is interested in at least looking into this please give me a call I can do the analysis and send you info for you to decide for yourself. It is not common knowledge so I must mention that at the end of the 25-30-35 year amortization of your mortgage you will end up paying double the amount or your original mortgage balance back to the bank in interest. I can help you find ways to minimize that, give me a call today. Abraham Niyazi - Mortgage Agent - Lic#M08010640 - Centum One FInancial Corp - Lic 10758. Cell: 416-993-4082 Toll Free: 1-866-728-3708 x 115 http://www.centum.ca/abraham_niyazi/ I deal with 25 Banks/Lenders and can do mortgages across Canada except Quebec.

My morgage is up for renewal in May 2014. I have 40000 left on it, original amount of 56000 at a rate of 5.12%. I called my Caisse Desjardins advisor who told me I could not get a lower rate unless I increases my loan to 56,000 plus notary fees. I asked her to increase my weekly morgage payments t 100$ instead of 70$ and plan to put a lump sum of 4000$ per year. Should I look for another bank ?

Hello Anon, the best source for the penalty calculation is your bank. They have all the info on the system and the calculator built in to give you a very close estimate on the penalty to break. I say close estimate because in a lot of cases the penalty is only accurate on the actual day of payoff due to the effect that a change in interest rates may have on that penalty. If you want to calculate the penalty on your own here is how you can get at least a rough estimate on your own -> Paying off your mortgage before the term ends may require you pay a penalty but it is different for different types of mortgages. If you have an open mortgage it does not carry a penalty to break. If you are not sure if you have an open mortgage or closed mortgage, chances are you are in a closed mortgage. (Open mortgages have higher interest rates and are not often offered by lenders unless the client specifically asks for them due to the chances of breaking the mortgage) The exact calculations vary from lender to lender and are spelled out in the terms of the mortgage agreement you received when you set up your mortgage to begin with. The basics are as follows. For a variable rate mortgage you will most likely be charged 3 months interest penalty (The next 3 months interest due on your mortgage payments basically ). If you have a fixed mortgage rate then things get tricky. You will be charged 3 months interest penalty or Interest Rate Differential (IRD). The first is the same as before but IRD is a whole different animal. It can get quite costly and is designed to prohibit movement of the mortgage to another lender due to a better rate environment. If the rates in the marketplace are higher than the rate you currently have on your mortgage you will be most likely charged the 3 month penalty. If the rate environment is such that rates are lower than what you have currently the IRD is often charged. The IRD compares how much money in interest you will save at today`s rates on your current mortgage balance and remaining term and that difference is the penalty to break. A step by step method is to use a mortgage calculator and input your remaining mortgage amount and your remaining mortgage term with the best rate available from your bank for the closest available term. The resulting interest paid to the bank over the remaining months is deducted from the interest you are expected to pay with your current mortgage, that difference is roughly your penalty. In this way clients don`t jump ship to another bank when the rates get better. I hope this information was helpful, if you or any reader would like me to do the calculations for them, no obligation, please don`t hesitate to call me at: Abraham Niyazi - Mortgage Agent - Lic#M08010640 - Centum One FInancial Corp - Lic 10758. Cell: 416-993-4082 Toll Free: 1-866-728-3708 x 115 http://www.centum.ca/abraham_niyazi/ I deal with 25 Banks/lenders and can do mortgages across Canada except Quebec. Please Google my name to access my various articles and videos on many mortgage related topics.