This  is an important point I have brought up previously, when BMO first introduced their 2.99% rate earlier in the Spring. These rates may seem very lucrative but beware, the penalty if you need to break can drain your bank account. To protect yourself from a hefty penalty called “interest rate differential”, here are some important questions you should be asking before you obtain that mortgage:

1. Ask the penalty charge before you even sign the papers. Sometimes they will not be able to give you an accurate figure (because no one truly knows where mortgage rates will be if and when you decide to break your mortgage) but you should ask for various mortgage rate scenarios so you are prepared.

2.Ask if the mortgage has portability. This can save you if you need to move because you can just assume your current mortgage aka bring it with you to the next home.

3. Think hard about you relationship with your bank. Do you really have to be tied to it forever? In most cases, the only way you can break your mortgage is if you are selling your home. And even then, it comes with a hefty penalty.

4. What are your pre-payment options like? The more you are able to put down on your mortgage, the less your penalty charge will be if you need to break your mortgage. Also, the more you are able to put down for pre-payments, the amortization will shorten even faster therefore paying it off sooner! Who wouldn’t want that?!

5. Ask your bank how they calculate their interest rate differential penalty charge. Every bank is different and it is important to ask whether they use qualifying rates or posted rates.

Contact Robert Clancy today to figure out whether it makes sense for you to break your mortgage or avoid high penalties altogether by working with a broker!