Penalty Calculators

While we’re on a mortgage penalty theme, here are links to the newest prepayment charge calculators from the top banks:

These calculators were inspired by this worthy initiative from the Department of Finance.

If you play around with them, you’ll notice something. The penalties vary wildly.

In fact, after making some standard assumptions*, we calculated hypothetical penalties with each of the above calculators. There wasn’t even one instance where two lenders had the same penalty.

penalty-calculationThe results ranged from 3-month interest charges under $1,000 to IRD penalties of more than $4,000. The large banks were generally the most expensive.

In short, this underlines (again) the significance of looking deeper than just the rate when comparing lenders.

On a side note, some banks obviously put a lot of care into making these calculators simple for consumers. Others, not so much.

 


* Hypothetical Penalty Assumptions: We assumed that maturity is in two years (Sept 17, 2014), rates would stay the same, posted rate at origination was 5.24%, the borrower’s actual rate was 3.09% (fixed), the borrower took a 25-year amortization, and the original balance was $109,124 (leaving $100,000 to pay out).


Rob McLister, CMT

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