Canadian mortgage question
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Can anyone explain to me what a "rate differential" is? I'm in the midst of transferring my mortage from Royal Bank to President's Choice (from 7.55% to 4.59%), and I got the impression that the penalty for breaking the mortgage early was going to be 3 months interest. It turns out I took the word of a banker instead of reading the paperwork myself, and that the penalty is actually the greater of the two - 3 months interest or the "rate differential". 3 months interest is $5000. I can handle that. The banker says that the rate differential is going to be more like $10000. Can't have that. J
"I am the Lorax. I speak for the trees."
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Can anyone explain to me what a "rate differential" is? I'm in the midst of transferring my mortage from Royal Bank to President's Choice (from 7.55% to 4.59%), and I got the impression that the penalty for breaking the mortgage early was going to be 3 months interest. It turns out I took the word of a banker instead of reading the paperwork myself, and that the penalty is actually the greater of the two - 3 months interest or the "rate differential". 3 months interest is $5000. I can handle that. The banker says that the rate differential is going to be more like $10000. Can't have that. J
"I am the Lorax. I speak for the trees."
Here's a link that might help you with the math, should you need it I've found this online calculator quite handy over the years: http://www.canadamortgage.com/calculators/differential.cgi[^] Banks are pretty effective these days about making mortgage transfers un-economical. Good luck David
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Can anyone explain to me what a "rate differential" is? I'm in the midst of transferring my mortage from Royal Bank to President's Choice (from 7.55% to 4.59%), and I got the impression that the penalty for breaking the mortgage early was going to be 3 months interest. It turns out I took the word of a banker instead of reading the paperwork myself, and that the penalty is actually the greater of the two - 3 months interest or the "rate differential". 3 months interest is $5000. I can handle that. The banker says that the rate differential is going to be more like $10000. Can't have that. J
"I am the Lorax. I speak for the trees."
To me it seems like it is the difference you would pay in intrest to move from from 7.55% to the current rate over the life of the loan. In other words you will save nothing by moiving your loan and you will have to pay a huge load of interest now! John
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To me it seems like it is the difference you would pay in intrest to move from from 7.55% to the current rate over the life of the loan. In other words you will save nothing by moiving your loan and you will have to pay a huge load of interest now! John
I found out. :( If the mortgage is at $100,000 and there are 2 years left, I'm charged something to do with the amount of money that the bank would have made had it loaned the $100,000 for 2 years back then. Since the 2-year rate back then was 6.25% and the 2-yr rate now is 5.0% (there's a huge gap), I'm buggered. Not sure of the exact calculation. J
"I am the Lorax. I speak for the trees."