Mortgage prepayment: know your rights

Mortgage prepayment penalties and privileges

A prepayment penalty is a fee that your mortgage lender may charge you if you:

Your lender may also call the prepayment penalty a prepayment charge or breakage cost.

If you have an open mortgage, you can make extra payments without paying a penalty. If you have a closed mortgage, there’s a limit to the extra amount you can pay on the principal amount each year. However, with closed mortgages, your agreement may include prepayment privileges. This allows you to pay more than your regular payments without triggering any prepayment charges.

Find out how to pay off your mortgage faster.

Your right to information about mortgage prepayment

Your lender may be a federally regulated financial institution. In that case, it must outline prepayment privileges, charges and other key details. You’ll find the information in a single prominently displayed information box in your mortgage agreement.

Your lender must also tell you how they’ll calculate the prepayment charges. They must provide you with a description of the elements they use to calculate the charges. If the calculation is complex, they may provide an example, an illustration or a simplified method to help you estimate the charges.

Learn more about prepayment penalties and how to avoid them.

Additional information about mortgage prepayment

Some lenders have agreed to provide more information on prepayments under a code of conduct. Banks that are members of the Canadian Bankers Association (CBA) have agreed to follow this code.

They’ll provide this additional information to help you understand prepayment and the charge that could apply if you choose to do this. This is so you can make informed decisions. They must do this in a manner, and using language, that is clear, simple and not misleading.

Lenders who follow the code have agreed to provide:

Banks will make this code available:

Find out if your bank is a member of the Canadian Bankers Association.

Learn more about the code of conduct on mortgage prepayments.

When these rights apply to you

These rights apply when you’re dealing with a federally regulated financial institution like a bank or federal credit union.

Find out if your financial institution is federally regulated.

Learn more about how your banking rights are protected.

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