FAQs

Frequently Asked Questions

Instead, it’s a double-edged sword. If you wish to leave your mortgage before the end of the term, for example, to take advantage of a better offer, you’ll have to repay the “cash back.” There is no free lunch!
In most cases, your best deal is not with your current lender. At Sneg Mortgage Team we contact you 4-6 months prior to renewal, start exploring what is available for you in the market, and get you a rate hold at best rates.
Canadians like to take mortgages for five years, but the average mortgage is only held for 3.7 years. This means that there is a good chance that you will pay a penalty of some kind. The way the penalty is calculated is key to your ability to save over the life the mortgage. Banks use the penalty to keep you with them; it’s surprising to see that they won’t share the way they calculate the penalty. It’s different from the two ways of calculating that are usually mentioned on bank websites. Call us before you conclude the deal with your bank, so we can calculate the penalty you’ll face if you break the mortgage.
Most mortgages offer pre-payment options of 15-20% annually of the original mortgage amount. It’s one of the most important mortgage features, allowing you to reduce the penalty and save a lot of money while switching midterm to a better deal.
A big bank will calculate the penalties so you will owe them $10,000 instead of the few thousand you would owe a credit union. There are two ways to calculate penalties, and the bank will choose the one that will earn them the most profit. In most cases, the penalty will be calculated using three interest rates, or by using the interest rate differential, which is the gap between the fixed rates calculated by the remaining terms. The big banks, however, often use a third method of calculating penalties, which they usually won’t share with you. You’ll find that for the same size loan at the same rate, an RBC client will sometimes face penalties that are eight times higher than a credit union client on the same street. The big bank take the posted rate on the same date that you got the mortgage, and will check what the discount you got from them was as compared to the posted rate. Then, they will calculate the penalty using those terms, which lets them impose sometimes unbelievable penalties of $40,000 or $50,000, thereby keeping you hostage for life.
Moreover, 30% of Canadians check “yes” on the renewal postcard that their bank sends them three month prior to the end of their mortgage, usually without even checking the terms! These terms are usually worse than those that the same client would get by going to the branch. Despite this, many Canadians will just check it off and send it back…
The best lenders allow you to make prepayments any month during the year in multiple installments, usually with the cycle of your payments. The less desirable option is prepayment on your anniversary. Flexibility and timing are critical when the time comes to breaking a current contract and switching to a better one. Please note that most Canadian do break their mortgage midterm.
It’s easy. Once you get your bank’s renewal offer, just send it to us. We’ll review it, look at your finances, listen to you, your desires, wishes and plans, and calculate your numbers. We do a comprehensive review, so your decision will take everything into account. Feel free to approach us, as you are at the time to act, time with no penalty, no restrictions, just more choices to do the best for yourself.
Of course you can, but it’s not as recommended, as your savings potential is laid out at the time you take your first mortgage. It will be more difficult and much more expensive to refinance a mortgage that has been constructed by the banks. We recommend doing the first step with an independent mortgage broker with the thought of breaking your mortgage within the first 2-3 years.
Refinancing midterm is your main tool to saving money. When refinancing, you have to take into consideration costs like penalty, legal fees, etc. We at Sneg Mortgage Team will call you whenever we think you may benefit from refinancing. Therefore we’ll do our best to avoid no-frills lenders or other restrictive mortgages that only let you refinance when you sell your property.