Lenders like to keep you in their web as long as possible. If you've got a closed mortgage and try to escape, they sink their penalty fangs deep in your wallet. To the surprise of many, there are dramatic differences in how those penalties are calculated, even at the same bank. CIBC, for example, sells mortgages under multiple brands, with CIBC and FirstLine being the most popular. Recently, we did an interest rate differential (IRD) penalty calculation for a FirstLine customer who wanted to refinance. This client was fortunate to have closed his mortgage at FirstLine instead of directly with CIBC.
Had that customer chosen a CIBC-brand mortgage instead, his penalty would have been $3,210 higher—even though it's the same parent bank in both cases.*
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