• Karri Flatla

The True Cost of a Fixed Rate Mortgage: Are You Aware of These Payout Penalties?

It is widely expected that the Bank of Canada will raise rates again in September. As such, many borrowers are feeling pressure to 'lock in' to a fixed rate mortgage, to protect their household budgets from increasing monthly payments.


Understandably, human beings prefer predictability to volatility. Change of any kind makes us nervous; forced change to our monthly budget makes us downright sleepless.


Yet homeowners' plans - and budgets - do in fact change fairly often. So, when you lock in to a fixed rate, you're locking into a promise you may not be able to keep.

History shows that six out of ten borrowers break their mortgage before the term is up. Why do you believe you are the exception? More importantly, why would the lender let you off the hook for lost profit?

The Canadian obsession with 'rate' is a misguided one. The true cost of a mortgage is hidden in the lender terms and conditions, fine print that many homebuyers often don't fully understand when signing off with a lender. (One more reason to have a licensed mortgage broker on your side.)


Here's the breakdown on the hefty payout penalties for breaking a fixed-rate mortgage.