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- Prepayment
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Q What is the difference between a fixed rate mortgage and a variable rate mortgage?
A The fixed rate mortgage has an interest rate that is locked in for the length of the term. The variable rate mortgage has a fluctuating interest rate that would change when Alterna’s prime rate changes. This will allow you to take advantage of falling interest rates and reduce your interest payments. If interest rates begin to rise, your interest costs will also rise. With variable rate mortgages, you have the option of converting to a comparable fixed rate mortgage at any time without incurring a penalty. For additional information about these options, please contact Alterna Savings at 1-877-560-0100 or Alterna Bank at 1-866-560-0120.
Q What is the difference between an open mortgage and a closed mortgage?
A Open mortgages indicate that they can be paid down at any point in time without incurring a penalty. They will typically carry a higher interest rate than a closed mortgage but do offer greater flexibility. Closed term mortgages help you save on interest costs but will also have prepayment restrictions. If you exceed the allowable prepayments, you will incur a penalty charge.
Q What is a mortgage prepayment?
A A prepayment is a lump sum payment of any amount in addition to your regularly scheduled mortgage payments. The term prepayment means paying your debt early. If you can make prepayments on your mortgage, you will pay less interest over time than with regularly scheduled payments.
Q How do I know if making a prepayment is the right choice?
A Alterna is here to help! Contact Alterna Savings at 1-877-560-0100 or Alterna Bank at 1-866-560-0120 to arrange an appointment with a banker to review your options. Here are some things to keep in mind:
Q What is a prepayment charge (prepayment penalty)?
A If you pay off your outstanding balance before your mortgage maturity date or pay an amount greater than your allowable prepayment privileges, you may have to pay a prepayment charge, depending on the type of mortgage you have. If you have an open mortgage, you can prepay in part or in full without a prepayment charge.
Q When do prepayment charges apply?
A Prepayment charges may apply in the following situations:
Q What information do I need to complete the prepayment calculation?
A The following documents will provide the necessary information: Mortgage Loan Agreement, Multi-Option Mortgage Document, Mortgage Commitment, Mortgage Renewal Agreement, or Annual Mortgage Statement. You can see your current mortgage details via online banking, but you will need one of the above documents for information regarding the initial terms of your mortgage.
Q Can I avoid paying prepayment penalties?
A The most common way to avoid prepayment penalties is to make a prepayment within your allowable limit. You can refer to your mortgage documents to confirm your allowable prepayment penalty or you can contact your branch for this information. Please contact Alterna Savings at 1-877-560-0100 or Alterna Bank at 1-866-560-0120 to arrange an appointment with a banker to discuss alternate options in more detail.
Q How are prepayment penalties calculated?
A If you have an open mortgage, you can prepay in part or in full at any time without incurring a penalty.
If you have a closed variable interest rate mortgage, the penalty is calculated as three months’ interest.
If you have a closed fixed interest rate mortgage, the penalty is calculated as the greater of:
Q What is a mortgage term?
A A mortgage term is the length of time that your mortgage agreement, at the agreed interest rate, is in effect. Upon expiry, you can repay the principal mortgage amount owing in full or renew your mortgage at current interest rates for another term.
Q What is the maturity date?
A The maturity date is the last day of the term of your current mortgage agreement.
Q What is an estimated rate discount?
A An estimated rate discount is Alterna’s posted mortgage rate (for the term you selected) when you got your mortgage less the actual rate of your mortgage. For example, if Alterna’s posted mortgage rate was 2.95% and your actual mortgage rate is 2.45%, your rate discount would be 0.50%.
If you have made any changes to your mortgage during your term, the estimated rate discount may not be accurate. To find your rate discount refer to one of the following:
Q Are there any additional fees that apply when prepaying my mortgage?
Additional fees like a discharge fee or assignment fee may apply in certain situations. Please contact Alterna Savings at 1-877-560-0100 or Alterna Bank at 1-866-560-0120 to arrange an appointment with a banker to review these fees in more detail as they apply to your individual circumstances.