By November, 2012, all mortgage lenders governed by the department of finance are going to have to provide more clear and concise mortgage prepayment penalty information which will need to include how the calculation will be made, calculation sheets for borrowers to utilize, where to find the different inputs into a calculation, and even how to prepay the mortgage without incurring a prepayment penalty.
This move has been promised for the last two years by the department of finance and now its finally coming into practice.
While greater transparency is welcomed by all mortgage holders, some would argue that the finance department has not gone far enough and in fact should require all mortgage lenders to follow a completely standardized prepayment penalty policy and calculation.
The argument against this is that each lender has a different set of costs they are trying to protect themselves against, and forced to follow a single prepayment policy, there could end up being higher rates in the market place and a reduction in the number of different mortgage programs that exist in the market today, which effectively is a reduction of choice to the consumer.
And while a standardized prepayment policy and payment is not likely to be legislated any time soon, the implementation of more transparent prepayment language is definitely a step in the right direction and will provide consumers not only with better tools to avoid prepayment penalties, but to also make better decisions with respect to selecting a mortgage in the first place as prepayment penalty is typically one of the least focused on an understood aspects of a mortgage contract.
But even with greater disclosure, potential prepayment calculations can still be difficult to understand fully. Which is why its always good to work with an experienced mortgage broker who can help you compare and fully understand the potential prepayment penalty that you could be facing with different mortgage options you are considering.
There can at times be a trade off between rate and prepayment in order to meet your preferred mortgage repayment strategy, so its definitely a good idea to go through the exercise of fully understanding this item before signing up for any mortgage program.
If you would like to better understand your prepayment options for a mortgage you have right now, or for a mortgage you are looking to get in place, I suggest that you give me a call so we can work through the lender’s prepayment policy and calculation together and help you determine which course of action makes the most sense for your situation.
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I'm a Toronto Mortgage Broker that arranges mortgage solutions on residential and commercial real estate property. With over 30 years of mortgage financing experience, I'm able to quickly assess your financing requirements and provide relevant solutions for your immediate consideration. Joe Walsh Google+ YouTube Channel