Quote:
Originally Posted by Nancy
If you were on a fixed mortgage and had 3 years left, don't they use the current 3 year fixed rate to determine what penalty should be applied?
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Here you go. it's either 3 months interest or interest differential. Umm what a crappy site. they totally messed up the 3months interest penalty. It should be mort balance X current interest rate,
divide by 12 and then times by 3.
Three Months Interest Penalty Paying off your mortgage before the maturity date, most lending institutions charge three months interest penalty (or an interest differential penalty).
Your present mortgage balance is multiplied by your current interest rate and multiplied by three.
Interest Rate Differential
This is the difference between the interest rate on your mortgage contract compared to the rate at which the lending institution can re-lend the money.
Example:
If your mortgage has a balance of $150,000 at 7%, you have 3 years left to go and the current 2 year mortgage rate is 5%. Then the lending institution will charge:
$150,000 X 36 months X 2% (7% - 5%) = $9,000