Obtain the RIGHT MORTGAGE – FAQ

About Right Mortgage

Right Mortgage is a unique mortgage product that allows you to custom build your own mortgage. Working with a Mortgage Alliance Professional, our borrowers choose the terms and features they want in their mortgage. Borrowers can see the effects their choices have on their rates immediately as your individual Right Mortgage is built according to your preferences.

Right Mortgage is serviced and arranged by Paradigm Quest Inc. Paradigm is an experienced mortgage servicer and a leader in the Canadian mortgage industry, and currently has over $18 billion in assets under management.

Right Mortgage is proud to offer our customers access to important information regarding penalties and the various mortgage options that are available to them.

Get in touch with a Mortgage Alliance mortgage professional.

My Mortgage Options

Open Vs Closed Options

Open Mortgage

In an open mortgage, borrowers can make additional mortgage payments without incurring penalties. An open term allows a borrower to renew, refinance or switch lenders at any time. The term is typically shorter, and is set from six months to five years with either a variable or fixed rate. While open mortgages provide borrowers with freedom, they usually come with a higher interest rate.

Open mortgages are advantageous to borrowers in that they allow extra payments to be made without penalty. As an open mortgage comes with a shorter term, borrowers who intend on living in their home for a short term may find that an open mortgage best suits their needs.

Closed Mortgage

Closed mortgages have restrictions on the amount borrowers can pre-pay. In agreeing to a closed mortgage, if you refinance or sell your home before the term is up you will incur a penalty. Closed mortgages have longer terms than open mortgages, ranging from six months to 10 years. Closed mortgages also typically have lower interest rates than open mortgages. While you cannot pay out your mortgage early without a penalty, Right Mortgage offers pre-payments for up to 20% of the original principle balance with each year.

Closed mortgages provide borrowers with stability through restrictive pre-payment options and lower interest rates. A closed mortgage may be suitable for borrowers who are planning on staying in their home for a longer term.

Fixed Rate Vs. Variable Rate

Fixed-Rate

In a fixed-rate mortgage the interest rate remains the same through the term. The interest rate is “fixed” (meaning it will not change throughout the term) and the borrower’s payment amounts remain stable throughout the duration of the term.

With a fixed-rate mortgage, the borrower is confident in knowing the amount they will pay. Fixed-rates provide borrowers with stability. Regardless of market conditions, and whether interest rates rise, the rate on a fixed-rate mortgage remains stable, at the agreed upon rate.

A long-term, fixed-rate loan will usually have a higher interest rate than a short-term, fixed-rate loan. In the end, the fixed-rate loan with the longer term will usually be more expensive. When choosing your fixed term, it is important to consider the length of time you want to lock in your rate to avoid unnecessary future prepayment penalties.

Variable-Rate

A variable-rate or adjustable-rate mortgage is a mortgage loan with an interest rate that is adjusted periodically. These adjustments are based on an index (usually referred to as the lender’s “Prime Rate”) which reflects the cost to the lender of borrowing on the credit markets.

As  aresult of these adjustments, Variable Rate Mortgages are generally better-suited to borrowers who are able to withstand potantial increases in payments during the term.  If the index (or Prime Rate) increases substantially in a short period of time, the borrower could experience a real financial burden.

On the other hand, a variable-rate mortgage is often considered to be advantageous because the initial interest rate is lower than a fixed-rate. However, it is important to remember that variable-rate mortgages depend on market conditions. The potential for saving money is balanced by the risk of higher costs if interest rates rise.

Long Term Vs. Short Term

Long -Term

A mortgage with a term of three years or more is usually considered to be a long term mortgage. The interest rate is typically higher than in a short term, but it offers stability by guaranteeing set payments and a set rate for a long period of time.

A long term mortgage is a good option when current rates are reasonable and borrowers want the stability of regular, consistent payments. A longer term may be considered by borrowers who believe that interest rates will rise over the course of the term.

Short-Term

Short term mortgages have a term of less than three years. Typically, the shorter the term, the lower the interest rate. Borrowers who choose a short term mortgage keep their rate options open on a short-term basis.

A short term mortgage may be considered by borrowers who believe that interest rates will fall in the short time, dropping in time for renewal. However, short-term mortgage borrowers run the risk of getting a higher rate when their mortgage is up for renewal.

How To Pay Off Your Mortgage Faster

Prepayment Privileges

Open mortgages provide the most flexibility for making prepayments. With an open mortgage you can pay the outstanding balance out in full or in part without penalty. Closed mortgages, on the other hand, have restrictions on how much borrowers can pre-pay. If you have a closed mortgage without prepayment privileges in your mortgage agreement then you are unable to make a prepayment without penalty.

Prepayment clauses included in the mortgage agreement outline the amount borrowers may pre-pay without incurring a penalty. Right Mortgage mortgages typically allow for up to 20% prepayment annually without penalty.  For more information about prepayment privileges or for information about your current prepayment privileges please contact us directly.

What Causes a Penalty

Most mortgages offer borrowers the option of a prepayment privilege. A prepayment privilege allows you to pay off some of the principal balance owing on your mortgage each year, without incurring a penalty. Right Mortgage offers borrowers to prepay up to 20% per year without penalty.

Prepayment penalties are incurred when the borrower pays more towards principal than what is allowed under the prepayment privilege of their mortgage contract. Penalties are also incurred when a borrower pays off the entire mortgage balance before the end of its term.

For advice on how to avoid a penalty, please visit the How to Avoid a Penalty page of this site or Get in touch with one of our trusted mortgage advisors.

When Would I Have to Pay a Penalty

Penalties may be avoidable with the right planning, the right mortgage and diligent tracking of prepayments.

You will be charged a penalty if you…

  • Pay more than your prepayment privileges allow.
  • Refinance and increase the amount you are borrowing before your maturity date and break your term in the process.
  • Transfer your mortgage to another financial institution before your maturity date.
  • Early renew your mortgage and break your term before your maturity date.

To avoid penalties be sure to…

  • Track the value of annual prepayments to be sure they don’t exceed the maximum amount outlined in your mortgage agreement.
  • Review your length of term, and consider whether you may want to refinance before your maturity date.

Review your length of term, and consider whether you may want to transfer your mortgage before your maturity date.

How to Avoid a Penalty

There are several ways a borrower can pay off a mortgage faster without having to pay a prepayment charge.

You can pay down your mortgage faster by increasing the amount or frequency of your regular payments. In changing your payments to weekly or bi-weekly, or increasing your payment amount you can put more money towards your mortgage and save money in interest. Right Mortgage allows you to increase your payment amount by 20% per year.

Lump sum payments allow you to put money directly towards your outstanding principal. In paying down lump sums towards your mortgage and not exceeding your prepayment privileges, you will avoid a penalty while making extra payments towards your mortgage.  Right Mortgage allows you to prepay up to 20% per year without penalty.

If you are moving, you can choose to port your mortgage and take your current mortgage interest rate and term with you to your new home. You can avoid a prepayment charge for paying off your mortgage before the maturity date.

If you are refinancing and increasing your mortgage, you may be able to “blend” your current rate with the new rate for the equivalent remaining term. You can avoid a prepayment charge by keeping your current rate on your current balance remaining, and blending it with the new rate for the increased amount.

An assumption of a mortgage is another way to avoid penalties if you are moving. The buyer of your home can assume your current mortgage, accepting liability for the existing mortgage. The buyer needs to apply and qualify in order to assume the mortgage, receiving your existing mortgage rates and terms.

How are Prepayment Penalties Calculated?

As a part of the contract between mortgage lenders and borrowers, the lender earns income through the interest that is paid by the borrower throughout their term.  If the borrower pays off the mortgage before their maturity date, the lender is entitled to recoup the interest that they would be losing. As such the borrower would incur a prepayment penalty. A prepayment penalty is calculated in one of two ways:

  1. As the greater of three months interest (depending on the current mortgage loan balance).
  2. As the Interest Rate Differential (IRD). The IRD is the difference between your original mortgage interest rate and the interest rate that the lender can charge today.

How to Estimate the Three Months’ Interest

Step 1: ________ (A)

How much do you want to prepay?

Step 2: ________ (B)

Your current annual interest rate

Step 3: ________ (C)

A x B = C

Step 4: ________ (D)

C ÷ 4 = D
D = the estimated three months’ interest

How to Estimate the Interest Rate Differential

Step 1: ________ (A)

Your current annual interest rate

Step 2: ________ (B)

The published interest rate for an equivalent mortgage, and remaining term.

Step 3: ________ (C)

A – B = C, the difference between your current rate and the rate in B

Step 4: ________ (D)

How much do you want to prepay?

Step 5: ________ (E)

The number of months remaining on your current term

Step 6: ________ (F)

(C x D x E) ÷ 12 = F

F = the estimated IRD

To calculate a penalty, visit our online penalty calculator.

Additional Fees

When you make a prepayment you may have other fees charged in addition to the prepayment penalty.

Mortgage Discharge Fee will be applied for preparing the discharge statement.

Mortgage Assignment Fee will be applied if you choose to assign your mortgage to another financial institution.

Cashback Reimbursement will be applied if you received a cashback payment in connection with your mortgage. If you prepay the mortgage in full and choose to switch your mortgage to another financial institution you may be required to reimburse a proportionate amount of the cashback. You may also be required to reimburse a proportionate amount of the cashback if you renew and the renewal is effective before your current maturity date.

Calculate A Penalty

This calculator makes certain assumptions and is for estimates only.  It will provide you with an approximate value to assist you in making decisions regarding your mortgage.  To obtain an exact payout figure, please contact us directly.

Payment timing, payment amount and interest rate changes can have a big impact on your IRD amount calculation. Use the prepayment calculator to see how changes can impact your prepayment charges.

Penalty Calculator

Please choose which of the following applies to your mortgage:

Please note, if you have a Low Rate Advantage mortgage please contact our customer service department for more information on your prepayment penalty.


Information about the calculator

When choosing the rate for the equivalent remaining term of your mortgage, round to the nearest whole term.

This calculator makes certain assumptions and is for estimates only. It will provide you with an approximate value to assist you in making decisions regarding your mortgage. To obtain an exact payout figure, please contact us directly.

Payment timing, payment amount and interest rate changes can have a big impact on your Interest Rate Differential amount calculation. Use the prepayment calculator to see how changes can impact your prepayment charges.

My Forms

Right Mortgage mortgages are serviced by Paradigm Quest Inc. To help us serve you better, please use the links below to make changes to your Right Mortgage mortgage.

You can manage your mortgage from the comfort of your home or office by using the following self service forms. Alternatively you can contact our client service team at 1-855-892-5401 or email customerservice@rightmortgage.com .

Mortgage Pre-Authorized Debit Form

Request to Modify Mortgage Arrangements

Contact Kelowna mortgage broker John Antle today to discuss your next mortgage