CBC: Chartered bank charges $30,000 mortgage penalty to woman forced to sell home due to pandemic

I was reading through the news yesterday when I came across this article about mortgage penalties that chartered banks are charging their mortgage clients to break their mortgage. This case was a TD mortgage. However, they also mentioned another example in the article that was a CIBC mortgage.

I have written about this and told my clients about it many times before. Have a look at my Mortgage broker vs bank article for more information about this and other issues that can cost you more money by working with a bank instead of a mortgage broker.

All Chartered banks calculate penalties in a similar manner

If you think that your chartered bank is different, you are mistaken. Every chartered bank calculates mortgage penalties on fixed rate mortgages in a similar manner. If you have a fixed rate mortgage with a chartered bank, you are vulnerable to this kind of penalty. There are some other banks or credit unions that will also calculate penalties in the same way, but not all of them do.

Most of my lenders do not calculate penalties the same way as chartered banks do

While I have access to some chartered banks, and sometimes it makes sense to place my clients, I try to avoid them where possible. I have many lenders that calculate penalties that can result in the penalty being 1/4 to 1/3 of what the chartered banks charge. Every situation is unique, but in a stable rate environment, there should not be a substantial penalty due. However, that is a critical profit centre for the major banks.

Do you want to take a chance? The mortgage interest rate advantage would have to be HUGE to justify the potential risk of such a mortgage penalty.

I, as a mortgage broker, do have relationships with mortgage lenders. However, I don’t work for them. I will not be fired for not meeting their volume targets. Therefore, I am in a position to place my clients into a situation that is best for them, and not the bank.