Robert McLister·Mortgage Tips & Advice·September 29, 2010The Devil In The Fine Print Mortgages sometimes have costly or irritating restrictions that you won’t know about unless you read the fine print or ask a mortgage professional. Some examples: Restrictions on breaking your mortgage before the term is up Restrictions on breaking your mortgage for the first 3 years A penalty surcharge of 1% for mortgages broken within the first 12 or 36 months “Reinvestment fees” (on top of mortgage penalties) Interest rate differential (IRD) penalties based on an onerous bond yield calculation IRD penalties on variable-rate mortgages (usually IRD penalties apply to fixed mortgages) IRD penalties based on a costly posted vs. discounted rate formula Inability to port unless the purchase and sale take place on the exact same day (which can be hard to arrange) A poor conversion rate guarantee No refinances during the first year No free switches (for transfer-eligible mortgages) Amortization limits of 25 years Minimum amortizations of 15-18 years Restrictions on converting from a variable rate to a fixed rate for the first six months No ability to break your “open” HELOC without a penalty No pre-payments within 30 days of discharge Inability to port across provincial lines A “no rate drop” policy after approval Monthly instead of semi-annual interest compounding on variable-rate mortgages High administrative fees when porting 100% clawback of cash-back if the mortgage is broken before maturity Requirement for a full banking relationship with the lender No lump-sum pre-payment privileges No annual payment increase allowance Pre-payments restricted to one specific day a year (instead of any payment date) And the list could go on… Keep a lookout for restrictions like this when comparing different mortgages. It’s even more important when sizing up cut-rate mortgages because the lower the rate, the greater the likelihood that a mortgage will be somehow restricted. Like news like this?Join our CMT Updates list and get the latest news as it happens. Unsubscribe anytime. SUBSCRIBE! Thank you for subscribing. One more step: Please confirm your subscription via the email sent to you.