A couple of other good points vs Canada: most fixed-rate US mortgages don’t have a prepayment penalty, and many offer the option to “recast”, which means you can make a lump-sum payment and reamortize your loan while keeping the rate and end date the same. This has the effect of lowering your monthly payment and is often used as an alternative to refinancing if you’re buying and selling a home in sequence.
In Canada, it's actually worse than stated. You do have a prepayment penalty as long as current interest rates are lower than your loan's interest rate.
Now that interest rates are higher than they were a couple of years ago, TD Canada Trust waived all my prepayment penalties. They were happy to let me prepay as much as I wanted.
It's incredible how one-sided the Canadian system is. Prepayment is acceptable as long as the bank benefits. Prepayment is not ok when the person taking out the loan benefits.
Thanks for this. I’d never heard of this option and once again I am shocked at how much better Americans have it than Canadians when it comes to mortgages.
