Rate Isn’t Everything — What Ontario Buyers Should Really Look for in a Mortgage

Denise Laframboise
Oct 5
2 min read

Everyone talks about the rate — but the fine print is where the real money is.

A mortgage rate may look good on paper, but a poorly structured mortgage can cost you tens of thousands in penalties, restrictions, or lost flexibility.

Here’s how to look beyond the number — and pick the right mortgage for you.

1. Prepayment Privileges — The Secret to Paying Off Faster

Not all mortgages are equal when it comes to paying extra.

Lump Sum Payments: Make annual extra payments directly toward principal.
Double-Up Payments: Pay twice your normal amount without penalty.
Accelerated Payments: Switch to biweekly or weekly accelerated schedules to save 2+ years off your amortization.

Even an extra $100 biweekly can cut years off your mortgage and save tens of thousands in interest.

2. Prepayment Penalties — The Hidden Cost of Breaking Early

Here’s a stat: 65% of Canadians break their mortgage before the term ends.The top reasons? Job changes, separation, or refinancing.

Two main penalty types:

3 Months’ Interest: Common for variable-rate mortgages.
Interest Rate Differential (IRD): For fixed-rate mortgages — and this one can really hurt.

Some lenders calculate IRD based on a “posted rate discount,” which can turn a $1,000 penalty into $8,000+. Always ask your broker how your lender calculates it.

3. Mortgage Charge Type — Know What You’re Signing

Standard Charge:

Easier (and cheaper) to switch lenders later.
Ideal for borrowers who want flexibility.

Collateral Charge:

Registers for more than your loan amount to allow extra borrowing later.
Harder and more expensive to move in the future.

Know which one you’re getting before signing.

4. Portability & Assumability — Flexibility for the Future

Portable Mortgages: Take your rate and term to your next property (within 90 days).
Assumable Mortgages: Let the buyer of your home assume your mortgage — handy if rates rise and your rate becomes attractive.

These options can protect you from paying unnecessary penalties down the line.

5. Discounted Rate Traps

Some lenders record your contract as a “discounted rate” from their posted rate.That’s fine until you break your mortgage — because penalties are then based on the posted rate, not your actual one.

A smart broker helps you avoid these traps and pick transparent lenders that calculate fairly.

The Takeaway

Yes, your rate matters — but so do the terms, penalties, and flexibility behind it.When you compare the full picture, you make smarter financial choices and set yourself up to win long-term.

CTA: Don’t settle for the lowest rate — let’s find the right mortgage for your life.Book your free consultation at LaframboiseMortgage.ca.