“Nah, we’re good. It won’t happen to us.” We hear this a lot. Most people feel their job is secure, their relationship is in great shape, and that they won’t need to move. And so they agree to crippling penalties if they choose to break their mortgage contract before its expiry date. Yet, experts say that 70 per cent of borrowers don’t go to the full term of their mortgage. The typical mortgage is for five years, and a lot can happen. Financial circumstances change. Jobs relocate. People marry or divorce. Harsh penalties help lenders continue to make money when low interest rates are lowering their profits. And, the penalty for cancelling can be extreme: The Interest Rate Differential is the typical calculator. This is the difference between the promotional rate you are given, and the bank’s higher ‘posted’ rate on the day of termination. That difference is multiplied by the number of months left in the mortgage. For example, if $250,000 is still owing on your home and you end your term 30 months early, with a differential of 1.5%, you’ll be on the hook for $9,375… that’s nearly $10,000 of your home’s equity, gone. Most contracts also state that if three months’ interest on your mortgage is higher, you’ll pay that instead. We’ll make sure you understand the terms of your mortgage, and your options to reduce your penalty if you need to end your term sooner than you thought!