The Blog

Mortgage Penalty Disclosure


Finally! The Canadian Finance Department has announced a “code” for Financial Institutions to follow in regards to mortgage penalties and how they disclose them or explain them to you, the consumer.

Right now many banks have very vague and convoluted descriptions and explanation on how the calculate their penalties and leave you mostly in the dark and at their mercy. This is a big win for consumers as these same banks will have to shape up and start to:

“…provide more information on how prepayment charges are calculated.”
“…explain the differences between mortgage products, including ways to pay off a mortgage faster without incurring penalties.”

All federally regulated lenders must be compliant to this by November 5, 2012.

Lenders Must Now Disclose:
  • The method they use to calculate the exact prepayment charge in a way that is clear, simple and not misleading.
  • When the penalty formula is complex, find a simple way to estimate penalties.
  • A description of all the numbers used in the penalty formula.
  • Information on how to obtain each of those numbers.
  • An example to help consumers figure out their own prepayment penalty.
Lenders Must Now Provide:
  • A summary of the consumer’s available prepayment privileges.
  • The dollar value of available prepayment options.
  • Explanation of factors that could cause your penalty to change.
  • Specific information needed for the borrower to calculate their own penalty.
  • A list of all other fees for early prepayment.
  • Contact information for the lenders staff that know how the penalty is calculated.

The full release can be seen here. →

If you have any questions, please don’t hesitate to contact me.

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