Mortgage penalty shocker, part two

This is becoming a hot issue as the penalties for borrowers trying to get out of fixed-rate mortgages just keep going up. I highlighted it here two months ago and have done recent Star articles here and here.

I’m concerned for a few reasons:

— When it comes to calculating an interest rate differential penalty, lenders can do what they like. There is no standard formula, nor is there any federal legislation or oversight. So, how can consumers challenge the bank’s math?

— Going to the bank’s ombudsman isn’t a solution. Most don’t even deal with complaints about rates or fees. Their view seems to be that if you had read your mortgage contract, you would have known a penalty was charged to get out early. You didn’t need to be told of the risks when taking out or renewing the mortgage.

— Using the mortgage prepayment privileges can make the IRD lower. But do banks tell borrowers? Not in every case, that’s for sure. Why isn’t there a law that this option must be made available to clients?

— Selling your house because you can’t afford to stay there is bad enough. It’s worse when a giant fee added at closing can swallow up whatever rewards you expected to make from the sale. Shouldn’t lenders warn financially stretched borrowers that they should plug the numbers into their planning?

After reading the comments below, I hope you agree that something needs to be done to help borrowers. These IRD penalties disappeared for a few years, but now they’re back with a vengeance.

Author: Ellen Roseman

Consumer advocate and personal finance author and instructor.

110 thoughts on “Mortgage penalty shocker, part two”

  1. We’re in the same situation. We renewed our mortgage with Firstline in July 2008 at 5.59% over 19 years. We’ve been making biweekly accelerated payments the whole time.

    We are having our third child (unexpected) and need to buy a bigger house. When I called to get the mortgage payout, they told us it would be $173,800…that is $3,800 MORE than our original amount borrowed!!! That would mean we’ve been making payments for 18 months for nothing.

    We were offered to port our new mortgage into the existing one, but only if we stay with Firstline.

    The only way to fix this is to stand up and fight the lending institutions. The banks shouldn’t be allowed to bully people with their own hard earned money.

  2. I have a question that I hope someone can answer.

    We bought our house with a 5% fixed rate mortgage/20 years. We made extra payments (as is allowed) and when it came time to renew after our 5 year fixed rate was up, we only had 10 years left on our mortgage.

    We renewed, then a year later I received a very large chunk of money from an inheritance. We decided to put that money down on the mortgage and it almost paid off the mortgage entirely. The bank charged us an IRD upfront of several thousand dollars.

    We just recently finished paying the mortgage off entirely. We went to the bank, asked if there were any final fees, he told us no. That we were no fully discharged, that we had to wait “about 4 weeks” to receive the discharge papers that we could then take to the Land Registry office and remove TD Canada Trust’s name from the deed.

    Today I received from TD that I owe $560 to discharge the mortgage.

    $300 in a Reinvestment Fee
    $260 in Discharge/Transfer Fee

    I would like to know why I have to pay these fees. When I paid the IRD penalty for paying my mortgage off early, I asked my banking “specialist” about fees and he said: “oh, you know banks, we take the money upfront, not at the end for mortgages.”

    None of these fees were mentioned. I was there, making sure at the beginning of January, that my mortgage was fully discharged and he said it had been.

    Is this right? Can I fight these fees tacked on at the end – which just seem like a ballsy way to squeeze an extra $560 out of us.

    Also, with terrible customer service like this, and with such mental incompetence, why would I EVER want to invest any more money in TD Canada (dis)Trust? They *just* got my mortgage paid off – now thousands of dollars are freed up, which I probably would have invested in TD (at least partially) – but now with this bullshit, they are getting diddly squat and I am looking for a new bank who can appreciate my business.

    So long, TD. You really know how to kiss your customers goodbye!

  3. The IRD is an OPTION for the bank. It has two ways of charging you a penalty:

    — 3 months interest,

    — IRD.

    In economic hard times, the bank could be using the 3 month interest penalty to help their customers but they have chosen not to. They took all the profit from the sale of my house and I HAD to sell.

    So you guys who are defending the banks, you obviously have lots of money to lose. I don’t.

    And let’s remember, ICBC IS ALREADY POSTING HUGE QUARTERLY PROFITS!! Oh ya that’s our money.

  4. I recently contacted the TD Bank for an early payout on a mortgage held by them on a transfer of title. I calculated the Interest Rte Differential amount due and came up with $4,800 (which isn’t too hard to stomach).

    When the bank calculated the penalty, they came up with $8,500. I questioned them about it and this is what I found.

    The rate of the mortgage was 5.35% on a 5-year term. The remainder of the mortgage was 18 months, but they used the 2-year rate of 3.95%.

    That should be a difference of 1.40%. Instead, I was shocked to find out that they claimed the mortgage was discounted at the time of financing by 1.35% and the Interest Rte Differential Penalty should take that amount into account. That is the reason for the high difference.

    I think it’s shocking and I won’t take this lying down. I have no choice but to pay the penalty to get out of their mortgage, but I will contact whatever financial watchdog there is to put a stop to their gouging.

    If they are entitled to the difference, then it should be the difference based on the mortgage rate in effect, not what it would have been 3 years prior. Obviously they gave the rate at the lower amount because the client was a good client. Now because he’s moving his mortgage, he’s no longer a good client?

    THIS MUST BE STOPPED AND I WILL DO EVERYTHING IN MY POWER TO CHANGE THIS! What the public doesn’t realize is that if they allow the property to go “Power of Sale”, only the principal and to date interest is owed, no penalty. Maybe that’s the way to go.

  5. You can add RBC to the list as well, and if anyone can offer advice on this please do. We renewed our mortgage with RBC at a rate of 4.5. We since purchased a new home, and sold our current house. Our contract with RBC was until 2013. We met with their broker to discuss rates. She offered us a 30yr at a blended rate of 4.3. We asked her about the current rates and she said that in order for us to get a lower rate we would have to close the current mortgage and pay a penalty fee of, well it started out as $7151, on a $171,000 mortgage but by the end of the meeting when written on paper suddenly changed to $8330? We asked why because we were not closing the mortgage with them as per say, we were actually increasing the mortgage, and she just kept talking about breaking a contract. We also asked her to break it down for us on paper, and her response was, What are you asking me a break down of? What is it you need to see on paper, so she hand wrote some of her figures, perfect!!
    Anyways, my question is why she couldn’t give us the lower rate and still lock is in unto the contract ends 2013.
    Also if she is giving me a blended rate, why do I have to pay the CHM Fee again?

  6. Hey Julie, it seems the banks do what they want. I have written a complaint to the Ombudsman for Financial Institutions, but I don’t know where it will go from there.

    Maybe if the government was bombarded by people who have had to pay these exorbitant penalties, something might be done about it. You might also want to write a letter to the CEO. Maybe you might get some sympathy there.

    I had a friend who was asked for $35,000 as a penalty. When he threatened to let the property go Power of Sale, the TD bank reduced the penalty to $15,000.

    Was your mortgage not “portable”? You might have wanted to consider an equity line of credit for the amount over and above your old mortgage. Good luck with it.

    We had to pay the penalties, but I am still fighting it because they charged us on what the rate was back then and not what the fixed term was on the mortgage. They get you every way they can.

  7. I have a question , if you do the “power of sale” route that means you are defaulting your loan and that means you are damaging your credit rating and that the bank would not give you another mortgage. Is this correct?

  8. Just paid ~ 20K to close a ~ 300K mortgage due to sale of house. Ouch!!

    “Re-investment rate” in contract is a very suspicious reference in the IRD calculation, which can have costly consequences.

    My documentation on this penalty charge from the bank is just 20K, but no calculation to back up penalty. I guess when you are making millions, 20k is small change for a fat cat.

    Unfortunately, the PR generated by this IRD calculation “option” is not positive… but this is the bank’s “choice” and will have to live with the consequences of its actions when they really need public support for their business.

    The term “loan shark” is the first thing that comes to mind when referring to a bank. For a proud Canadian, this is saddening and quite the tarnish for someone who held our banks quite highly … yes, I feel I just got “worked” over.

  9. Home Trust is disgusting! After 5 years of mortgages with them, I am ready to tear my heart out.

    We were self-employed and went through Home Trust for our very first mortgage in 2005. It was a one year mortgage and when we re-mortgaged with them in 2006, we also got a line of credit. We eventually rolled the line of credit into the mortgage and then, when the economy nose-dived, our business died as well. We had to move out of our own home and rent it out!

    In October of 2009, my husband took a position with Canada Post (where he used to work) and we went to Home Trust to once again refinance. Our mortgage was not over yet but we had several terrible tenants and were a bit behind.

    We did not get anything from this new mortgage, other than the 2 months of payments that were due. The fees they charged on each of our mortgages was insane!

    For the mortgage in October, we told them that it was a rental unit now and we were looking at taking a transfer with Canada Post to Nova Scotia, as the cost of living is lower. The only mortgage they would offer us was a 2-year closed at 7.75%! We had no other choice! They verbally told my husband that they would give us a mortgage as soon as we got to Nova Scotia, no problems.

    We took the transfer and went to NS in December ’09. Our townhome in BC was on the market and we again checked with Home Trust about a mortgage in NS. Again, ‘no problem’.

    We had a firm buyer on our home (in August of 2008, we had sold the townhome for $260,000 to a couple, we signed the papers, the bank had said yes to their mortgage, and the next day, the US economy tanked. The bank pulled the mortgage. Our home sat on the market for another year and sold for $204,000….).

    So, we waited until all the papers were signed and the purchaser had their financing in place. We couldn’t back out! We contacted our sales rep at Home Trust and sent in the MLS info for the property in NS that we had placed an offer on.

    After waiting for a week, Home Trust came back to tell us that their underwriters were only doing mortgages for Halifax. We are 90 minutes from there! They refused to give us a mortgage. They did state, in an email, that if we wanted to move to Halifax they would get us a mortgage there in a day!

    Now we were committed to the sale of our home and, as we no longer qualified for their 90 day refund policy on penalties, we were hit with an $11,000+ penalty…..that left a whole $204 for our lawyer to give us at the end of our sale. It is being put in my bank account today, April 1st! I really wish this was an April fool’s joke. After 5 years of mortgage payments and $30,000 in renos, we made 0.1% on the sale of our home.

    Home Trust effectively took everything we had and we are now starting from scratch! Their reasoning is, of course, that our mortgage was at 7.75% and if they were to mortgage someone right now, it would be at 3.84%, so they would lose $11,000.

    They also told us that they would never give us a mortgage for 3.84%, so I have no idea how they can use that as the rate differential. And in order to even qualify for the 90 day penalty refund, we would have to re-mortgage with them for the exact same amount as our other mortgage and at 7.75%. But, of course, they will not mortgage us outside of Halifax.

    This is NOT ethical!!! How can Canada and CMHC allow this to continue! If the interest rates were reversed, my mortgage currently being at 3.84% and the prime rate being 7.75%, would Home Trust give me an extra $11,000 because I let them out of MY mortgage early? Only in my dreams! If anyone is planning a class action lawsuit, I will definitely be there to join and support.

    Home Trust’s motto is that they don’t make you jump through hoops, what a lie!

    The worst part, my 5 year old keeps asking my husband why he doesn’t have his own room with his own toys, since we are currently living in a tiny 1 bedroom cottage, now we can tell him the truth: Home Trust stole all our money!

  10. I have to break my mortgage and I’ll have to pay a penalty for about 3.5 years remaining and for a rate differential of about 1.1% and principal of $70k (reduced after all pre-payments allowable). Not a big deal, it goes to about a $2,500 penalty.

    I understand the bank’s position that they charge penalty on the rate differential, since this is the money they would make if I didn’t break the mortgage contract.

    However, this statement is not true because if I want to close a mortgage, then I will use all my pre-payment options in every year of the mortgage. That means that the bank would not get $2,500 in interest, but somewhere around $1,200.

    The banks do not consider pre-payment options when they calculate the IRD penalty. I would like to see this regulated and the banks forced to take it into account when calculating the penalty.

    For example, in my case, I can use 25% (of original amount) pre-payment which is $37,500. The mortgage anniversary is November.

    So in November, I would pay $37,500 reducing my principal to about $30,000. Next November, I can just pay it off, no penalty. So the bank charges more than the fair amount.

    We should start a legal challenge.

  11. Really sorry to hear about all of the troubles you’ve all faced here. The learnings from this page helped me a lot.

    My mortgage with Firstline has about two years remaining. However, we decided to upgrade to a larger house (in a different area, essentially the same cost).

    After reading the stories above, I had a good understanding of IRD penalties, and after spending about 20 minutes discussing them with my Firstline mortgage consultant, we found a way to avoid them almost completely.

    By purchasing our new house and selling our old one with an identical closing day, and keeping the original 5-year rate we had in 2007 (5.06%), we avoid the IRD by bringing them a ‘seamless transaction’.

    I know that this doesn’t help anyone forced to sell and not purchasing a new place, but for those in portage situations, it is a way to maximize your profit from one home to another…

  12. I still fail to see how it is the bank’s fault you don’t know what you were getting into financially when you took out your contract loan. That’s what it is… a contract. Between the bank and you, on your word and some evidence you’ll pay them back. To assume that risk is where they get their money.

    It’s not really the bank’s fault that you got laid off, or that interest rates tanked, you agreed to pay them for 5 years. End of story. Why did you lock in for 5 years in the first place? Why didn’t you get a variable or open rate mortgage? These options were around the whole time…

    When the rates go back up in a couple of years, do you think it would be fair for the banks to cash you all out of your 3.69% mortgages just so they can make more on interest when it goes back up to 5.5%? There would be a holy uproar, and well deserved. This is exactly what you are proposing to them, and then calling them greedy and grasping to boot.

    I don’t understand the sense of entitlement at all. I sympathize with your life situation, but taking it out on the banks when it was clearly spelled out at the start isn’t going to help. It’s hardly their fault you couldn’t be bothered to read your contract, or be responsible enough to retain an accountant or attorney to interpret it for you. People don’t generally lend eachother half a million dollars with no guarantees in place… why would you expect different?

  13. Thanks for everyone for sharing their stories. Living in Canada for only 10 years now, I’ve come to the realization of how happy I could have been in my native place of birth in terms of banks and their mortgage system.

    The stories being told here are outrageous, but still… always there are these few people who do not (or do not want to) understand that any contract can have abusive (consumer) clauses, which may make them invalid.

    It is not true that just because it is written and signed, it can’t become irrefutable; on the contrary !! Any undergrad lawyer student knows that… and people here should know that as well.

    The differential in the economic power between the parties involved in a mortgage contract (bank vs. consumer) should be sufficient to allow any judge to rule in favor of the less powerful, that is, for the individual, given that the bank is still getting its chunk based on the 3-month amount.

    But again… we are in Canada, not in my native land where, for sure, the rights of any consumer/family would come first.

  14. This is a reply to JWC, April 12. You must be a banker!

    You say it’s not the banks’ fault that we lose our jobs and need to sell our homes. Maybe not, but don’t forget it’s the consumer (the banks’ customers) that keep the banks in operation.

    So why should the goverment bail out the banks when they mismanage their business? They did and where did that money come from? Taxpayers. So get your facts straight before you come here and post your thoughts.

    And you go tell all those people who lost their homes that the bank had every right to be greedy. You seem to forget that the banks do have options!!!

  15. TO JWC……I can understand where you’re coming from. But, if the mortgage rate on the mortgage is fixed at (let’s say 5.25%) why would the interest differential be based on what the going rate was at the time? A deal is a deal.

    When you invest in a GIC for 5 years at say 4%, the bank doesn’t give you the 5% if you collapse it early. So one way or another, it’s always in the favour of the banks.

  16. I work in the Financial Services sector. I am well versed in the bond markets, understand mortgage pricing, respect pre-payment obligations etc. I have no interest in trying to avoid a fee. When it comes to money, I cross every I and dot every T.

    My concern is the total lack of transparency with respect to the IRD calculation and, as many contributors have indicated, the ability of banks and other mortgage lenders to articulate those calculations.

    My Fiancee and I are expecting a baby. As a result, we made the decision to start combining assets. This, of course, included our house, which we did not buy together.

    We were told by the city that the only way to get title changed was to have both our names on the current mortgage. No problem, we’ll just add a name to the current mortgage.

    Not so fast. Our mortgage product is no longer offered, therefore no changes are allowed to be made.

    Putting another name on the mortgage — that is, adding a borrower — would ultimately strengthen the lending institution’s position. Strange and frustrating.

    After much back and forth, we were presented with 2 options:

    (a) Pay out the $15k penalty and renew the mortgage with them? ??????? After they refused to co-operate with our request to add a name??? Not happening!

    (b) Or be patient and wait for the remaining 2 years to renew. With a child about to be born, not a situation we felt comfortable with.

    After much deliberation, we were essentially forced into closing out our current mortgage. Before we did this, we made the call on May 5th and were given (in an email) a penalty of $15,600.

    Our mortgage was funded on June 1st. Thinking all this drama was behind us, we were pleased. Unfortunately, our lawyer called us to inform us that the IRD fee was actually over $20k.

    My assumption was that something was wrong, as I had done the calcs myself and received the email from an employee at the institution less than a month before. Wrong!

    As it turns out, our mortgage had 1 year, 11 months and 30 days left on it. So the bank didn’t use a 2 year mortgage rate to calculate the IRD. This one day moved the calculation to a 1 year rate, which of course is much lower and caused the $5k difference.

    If our mortgage had been funded on May 31st, it would have remained at $15k. So for one single business day, this mortgage provider has decided they are out 5+ thousand $$$$.

    At no point was this communicated to us in the dozen calls and emails we had. Even the most informed person can be stung. This is the problem!! Nowhere in their paperwork is this illustrated.

    We have yet to hear back from anyone. I am, however, hoping the difference is paid back to us.

  17. All I have to say is we just sold our home and didn’t have enough equity to pay the realtor fees and the whole mortgage payout. The banks have you coming and going unfortunately…………………literally.

  18. I just fell victim to CIBC’s predatory IRD penalty practice to the tune of 15k on a 265k mortgage. Of course it was never mentioned to me when I was given the mortgage, and bad on me for not asking – I should have known not to be trusting of CIBC bankers.

    I had to move out of country to take a job (the US mortgage broker I dealt with was disgusted by our Canadian system which we have no recourse against) and I had no choice due to residency issues to sell my home – I would be double taxed if it remained in my possession. I am currently asking my manager who I once liked for reprieve but was told that not even they could get out of such a penalty.

    Anyways, yes ask CIBC before taking a mortgage how harshly they will penalize you and take your money (at loanshark rates). I didn’t and now my family is suffering greatly for it. It’s a shame.

  19. When is someone going to start a law suit against the banks.. I’m with national and I want to do so… anyone want to join forces?

  20. This IRD is brutal! I went to my bank (TD) in September to get a quote for breaking my 5 year mortgage after a year and 1/2 and was quoted a penalty of $3,300.

    Fair enough, as I was fully aware of a penalty that was apparently supposed to be around 3 months interest. After putting my place on the market, I double checked with the bank in November and the penalty was now $11,000!!!???

    I was never told that the penalty could fluctuate (especially this much in less than 2 months) and I went to 2 different brokers at TD and neither of them could even explain how these numbers are justified or even work.

    I am just shocked and appalled at the lack of full exposure on behalf of TD and even their ignorance on their own policies. This type of penalty does need to be standardized because it makes it nearly impossible to set a selling price if the penalty can vary so much.

  21. Well, I’m in the same boat as everyone else. Our lender was First National and they screwed us just the same.

    With less than a year and a half left on our 5year term, we were told our break fee was roughly 10,000 + some other hodge-podge of fees for god only knows what.

    Like most here, I was fully aware that a penalty would be forthcoming, I have no problem paying a fair and justifiable amount of compensation for their loss of revenue.

    So our numbers worked out to having an opening balance of 211,000 and now will cost us just over 216,000 to offset. I thanked them kindly for the privelege of getting loan-sharked and left it at that.

    I can’t fathom how the regulatory agencies could be seeing these calculations and not be extremely alarmed!! Thanks again big government…

    I haven’t done any research yet but does anyone know if sellers in the US are subject to this type of usury? i would assume not at the present time due to the shaky housing market in certain areas but prior to the meltdown, I would be curious to know if it was similar.

  22. I have another bad situation to the tune of $19,900.00 based on the fictitious IRD scam. 2 years left on a 5 year mortgage and yes I read the “fine print” and literally it is fine print, inbetween 2 paragraphs, smaller than anything else on the page. This company is “HOME TRUST”! I just got off the phone with them and would you believe that after my little rant, they had the nerve to offer me a refinance of my exsitin gmortgage with them. I told them they are basically the equivalent of the mafia! leagalised crime, they keep it right on the line, preying on the week credit of hard working honest Canadian people. Shame on you home trust and shame on me for falling into your money trap.

  23. In Australia the government banned mortgage exit fees after banks started raising their variable interest rates much faster than the reserve bank rates.

    Basically, the banks realised that once they’d locked customers into mortgages they could raise rates with impunity, and force people to pay ridiculous rates by blocking their exit with also ridiculous fees.

    Banning of exit fees has made the mortgage market so much more competitive and consumer friendly. Wish they’d do that here. It’s not like the banks aren’t already making way too much money!

  24. Want to recover some of the IRD fees?

    Go register a complaint with the OBSI.

    We did and we settled for a refund of 30% of the original IRD fee.

    Best of all, it likely cost the bank 3X that to settle it.

  25. We also have been chasing the TD to review the $14K IRD penalty they wewre about to impose on us for the bona fide sale of a house and even an offer to take out a new mortgage. We went through all channels and got to the point of getting a customer care ticket with the Regional sales manager Alison. After several phone calls, discussions letters and emails, we got our rulling yesterday. The IRD stands!!
    However……her letter to us wrote this:
    “IRD is calculated based on the difference between the rate on the mortgage in question, and the prevailing rate in effect at time of payout for the term remaining on the mortgage. The IRD formula considers the ‘present value’ of the difference between the rate on the mortgage and the prevailing rate for a mortgage with a term equal to the term remaining on the mortgage. The figure that results from those calculations is the compensation due.

    TD Bank does not profit from IRD. Prepayment of the mortgage plus the compensation puts TD Bank in the same position at the end of the term that we would have been in if there had been no pay down/out or refinance. The Terms and Conditions of your original mortgage contract would have clearly outlined these requirements, and this is a standard across the financial industry.”

    Heres the point. We were told the IRD was calculated based on the difference between the original posted rate and the current posted rate of a term remaining. In this case 7.25% versus 3.45%.

    Not according to her letter it is calcualted based on the real mortage rate (5.79% not 7.25%) and the 3.45% of the reamining term posted rate. Basically that reduces it from
    $14K to $8K. I’m happy with that.
    Take advantage of prepayment privileges and we are down to about $6K. And since the bank does not profit from it, no need to charge a premium over our current interest rate.

    Use this note in your negotiations as it will save you money. And pursue the bank. They know they are in the wrong.
    PS ING will waive IRD if you have a bona fide sale of your home and you renew your mortgage with them. TD is definitely the hard ass bank out there.

  26. I’m writing today, more because I’m seriously disappointed, than anything else, because reading about other people’s complaints on the web, I’m certain nothing will come of my complaint, but read this anyways.

    Me and my Family arrived from South Africa, 3 years ago, WITH NOTHING!! and we picked TD as our Bank. My brother and his wife are Medical Doctors and we used TD, seeing they advised us to.

    We got loans to buy things we needed after getting here, and he had to co-sign. We paid off 3 loans in less than 3 years, and finally built up a good credit history.

    As it now stands, I made the mistake of getting a mortgage through TD for our first home in Canada. We had to move again, seeing I got a better job, and decided to sell our property.

    Now I knew I would have to pay penalties and planned for that. I contacted my branch, TWICE, before accepting an offer on my property in order to put a price on it that would not leave me in DEBT!!!

    I was told, TWICE, that my penalty would be just over $2,000. I went ahead and accepted the offer.

    Since the new people needed a few weeks to get financing, there was NOTHING I could do in the meantime but wait. Their financing was approved, but then suddenly my lawyer contacted me saying I now owe money.

    My IRD went from just over $2,000 to just under $9,000 in the time I accepted the offer and waited for their financing to be approved. Now I had to get another LOAN from TD, just to cover my losses.

    I think it is WRONG that a bank like TD can just now say we are so sorry, you made a decision on info you received from us, but get lost, pay what you owe us, seeing you are just a number.

    I don’t expect any help on this matter, as I know a bank like TD is way too big to touch.

    I just wanted to let you know, that after I paid what I owe TD, they will never see another Dollar from me, and I will do everything in my Power, that TD lose the business of every Doctor (My Brother and his Family included) or any member of my family or any other South African planning to come over.

    It’s sad that my business means so little that they are willing to lose people over $6,000. I have never had the bank wait for ANY payments or money.

    My account might be pathetic in TD standards, but I know people that they do not want to lose. Thanks for your time and God Bless.

  27. I took out my first mortgage in January 2011 with Scotiabank. The mortgage specialist that I dealt with throughout the transaction very clearly explained the prepayment penalty (3 months interest or the IRD, whichever is higher) to me before I signed the contract. Also, my mortgage documents clearly explain the prepayment charges, in large print and easy-to-understand language.

  28. What if you have an open mortgage? Does any of this apply, other than the admin fee of $250 to discharge the mortgage?

  29. i AGREE that something needs to be done to help borrowers!!!!
    i just recently got ripped off by first line mortgages they are the worst mortgage lenders. And their staff is rude.

  30. The situation is much worse when you think about it. My 5-year fixed rate closed mortgage just expired. I decided to re-new it without selling a house.

    My bank gave me twice as high a renewal rate as another big bank was giving, so I decided to switch. All parties assured me that there no penalty and legal fees would not be involved. I even got in writing that my appraisal fee would be reimbursed.

    And yet I noticed that during the switch, my loan had an extra $4,100 on the top of mortgage discharge statement that was given to me.

    I was told that after mortgage discharge statement, Scotiabank issued the mortgage switch statement. These new figures were used by my new bank to open the loan.

    Nobody showed to me this switch statement in spite of the fact I was trying to see it during two months. I was four times in the banks.

    My original bank told that they sent it to my new bank and I should request it there. Three representatives of the new bank told that they had not received this statement.

    However, I have e-mail from National Bank of Canada that they got this $4,100 higher figure from this mystery paper that nobody saw.

    I guess a lot of people just pay such hidden fees without noticing it.

  31. The Scotiabank Financial Adviser told me that there is no mistake with the $4,100 addition.

    I was told the transaction was verified by lower levels from both banks and they did it the same way as they do a simple switch transaction for everybody.

    There was no any attempt to understand or explain anything.

    The moral is simple: it is enough for the bank to steal from everybody to be correct.

  32. I got my 41 hundreds back from Scotiabank finally, they are still thinking that they did me a favor because National Bank of Canada should be reimburse money to me.

    Thanks everybody who left the comments to this article they were very useful in my fight. Comment from Fred that was dropped on July 29, 2011 was especially helpful. Banks started to talk with me after I mentioned OBSI.

    Best Regards to everybody.

  33. We are wrapped up in a huge row with TD at the moment over the IRD calculation.

    We have $380k outstanding on our mortgage and the bank has advised that because we blended the rate, we are liable at the higher of the IRD (pro-rated over the remaining term) or 3 mths interest.

    Our earlier mortgage was at 5% and the bank would have made $80k in interest from us over the 5 yrs. When we blended, the bank stated (front of the agreement) that they would make $70k over the 5 yrs in interest.

    My understanding of the interest rate differential at the time was that it was the $10k, since this was the difference financially that the new interest rate made to their profit, and that pro-rated over the half term remaining, worked out at $5k.

    No, says the bank, it’s the amount of profit we did not make from you because you paid out early. So what the IRD means in their book is another 30 mths of interest payments, certainly not at the Bank of Canada rate, but at their much higher special IRD rate.

    This comes down to a material misunderstanding, and we will be approaching the OBSI.

    Throughout my banking experience with TD, I have had a hard time getting anybody there to explain this properly. If nobody understands the way the penalty works, then how on earth are customers expected to know?

    My understanding of confusing terms in contracts is that they come down to the understanding of the terms that the parties had.

    We dealt with in TD in good faith but I will never ever bank with TD again. I am really sorry that the other folks here have also been burned by this bank on something as fundamental and basic as the home they live in.

  34. I never got my money back. I took it all the way to the omsbudman for CIBC. They all stick together. It’s hopeless. The banks just get richer and richer.

  35. We recently wanted to refinance our home and are three years into our five year term mortgage.

    We calcuated the penalty at $7,500. We were shocked when TD advised the penalty is $18,000.

    They are basing this on the fact that we got a 1.5% discount on the original interest rate. This is not stated anywhere in our mortgage documents.

    They rely on a rate posted on their website for the five year rate back in October 2009. This website is not referenced in our mortgage document, nor is the 5.64% interest rate referenced in our mortgage document.

    We are going to push this and get our lawyer involved. There is no way TD can legally rely on an unstated discount and website posted rates in relation to a contractual agreement.

  36. I also have come across this same issue.

    Everyone needs to start filing complaints federally with their MP. Also, get lawyers involved or provincial regulators.

    The government is probably the only one who can effect any change.

    I am shocked that this penalty is even legal. The banks do not pay me if I am in a low interest rate investment. So why should I pay them if I am in a higher rate mortgage if the interest rates are low?

    The banks are making record profits and this is how. It is entirely underhanded. They are not stating the reduced rates in legal contracts.

    If nothing else, I am NEVER taking a fixed rate again. Why bother if I am just penalized when I sell?

    I wish my mortgage rep had explained the IRD properly.

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