Ottawa, March 7, 2013 – Canadians who are considering whether to make more than their regular mortgage payments or who are looking at breaking their mortgage may now have new ways to find out about prepayment charges. For example, some mortgage lenders will now make available toll-free telephone access, where knowledgeable staff will be able to provide borrowers with the actual prepayment charges that would apply at the time of their call and, upon request, provide a written statement showing the amount of the charges.
Mortgage agreements may include prepayment privileges which allow borrowers to pay off their mortgage faster without triggering any prepayment charges. But in other cases, prepaying more than the contract allows, or breaking the mortgage, can result in prepayment charges that could cost thousands of dollars.
“The mortgage payment is usually one of a homeowner’s biggest expenses. Looking at ways to pay off a mortgage faster or changing it to get a better rate can save a lot of money, but might also result in prepayment charges. Consumers will now be able to make decisions based on current information about those charges and how they will be calculated,” says Ursula Menke, Commissioner of the Financial Consumer Agency of Canada (FCAC).
All elements of the Voluntary Code of Conduct on mortgage prepayment, announced in March 2012 by the Honourable Ted Menzies, Minister of State (Finance), and Shelly Glover, Parliamentary Secretary to the Minister of Finance, are now in effect.
“The Code enhances the information disclosed to consumers by their financial institution, while raising their awareness of any obligations or penalties they might incur when repaying their mortgages more quickly,” said Minister Menzies. “This Code, which will be monitored by FCAC, will go a long way in helping consumers manage one of the biggest financial decisions of their lives.”
In addition to telephone access to details on the prepayment charges, lenders who adopted the Code will provide consumers with information about factors that affect mortgage prepayment charges, online financial calculators and certain other information annually. Consumers who confirm they will be making a prepayment that will result in a prepayment charge can receive a written statement.
Banks that are members of the Canadian Bankers Association (CBA) have agreed to adopt this Code. FCAC monitors and reports on compliance with the Code, and the Agency has updated its website,itpaystoknow.gc.ca, to provide consumers with more information about their rights and responsibilities on mortgage prepayments.
With educational materials and interactive tools, the Financial Consumer Agency of Canada (FCAC) provides objective information about financial products and services to help Canadians increase their financial knowledge and confidence in managing their personal finances.FCAC informs consumers about their rights and responsibilities when dealing with banks and federally regulated trust, loan and insurance companies. FCAC also makes sure that federally regulated financial institutions, payment card network operators and external complaints bodies comply with legislation and industry commitments intended to protect consumers.
You can reach us through FCAC’s Consumer Services Centre by calling toll-free 1-866-461-3222 (TTY: 613-947-7771 or 1-866-914-6097) or by visiting our website: itpaystoknow.gc.ca.
