Know your options

Do you want to make an extra mortgage payment or pay off your mortgage balance? Making extra payments – called prepayments – is a great way to reduce your mortgage and if you have an open mortgage, you can make prepayments at any time.

If you have a closed fixed or variable rate mortgage, there are a few things you should be aware of before you make your prepayment.

  • Closed mortgages allow you to make extra payments up to 20% of the mortgage principal each calendar year. This type of payment can be made on any business day of the year and with a minimum of $100 up to the maximum of 20% of the original principal.
  • You can also increase your monthly payment by 20% once each year and you can increase the monthly mortgage payment by a minimum of $50 up to a maximum of 20% of the documented payment amount annually.
  • If you want to pay the entire balance of your mortgage, an extra fee applies. That fee is called a prepayment penalty and will be the greater of either three months’ interest or the amount of the interest differential penalty. Those penalties are calculated like this:
    • Three months’ interest penalty is based on the outstanding mortgage balance
      • Outstanding mortgage balance X documented interest rate / 12 months per year X 3 months
    • The interest differential penalty (IRD) is the difference in interest between the documented mortgage rate and the prevailing rate (rate at which Servus could realistically replace the mortgage at today) for the number of months remaining on the contract at time of payout.
      • Outstanding mortgage balance X interest differential (documented rate minus prevailing rate) / 12 months per year X number of months remaining on contract.

If you have a fixed rate closed mortgage, you can find information that can help you understand your potential prepayment penalty in section A of your Mortgage Schedule which is your mortgage agreement.

If you have a variable rate closed mortgage, you can find information that can help you understand your potential prepayment penalty in section V of your Mortgage Schedule.

To get the best, most accurate information about prepayment eligibility and to determine if you might be assessed a prepayment penalty, call us at 1.877.378.8728. One of our advisors can help you understand the details and make sure there’s a solution that works for you.

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