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.