When choosing a mortgage, many borrowers focus on getting the lowest interest rate. But what happens if life throws a curveball and you need to break your mortgage early? The penalty for breaking a mortgage can be significant—sometimes wiping out any savings you gained from a lower rate. That’s why it’s important to weigh your options carefully:

• A lower rate with a higher penalty can save you money in interest but can be costly if you break your mortgage early.
• A higher rate with a lower penalty gives you flexibility, making it easier and cheaper to exit your mortgage if needed.

So, which option is better? It depends on your future plans.

When Should You Consider a Mortgage with a Lower Penalty?

If your plans are uncertain or you anticipate a major life change, a mortgage with a lower penalty could be the better choice. Here are some common situations where flexibility matters more than the lowest rate:

• Career Changes: If you expect a job transfer, promotion, or career shift that requires moving within a few years.
• Growing Family: If you’re in a starter home but anticipate needing more space soon.
• Potential Separation or Divorce: While not an easy topic, major life changes can make it necessary to refinance or sell your home.
• Investment Properties: If you’re testing the waters with real estate investing but may sell or refinance in the near future.

In these cases, breaking your mortgage early with a high penalty could cost you thousands—sometimes more than you saved with a lower rate.

How Mortgage Penalties Work

Lenders count on borrowers to keep their mortgage for the full term. If you break your mortgage early, they charge a penalty to recover lost interest. The penalty amount depends on your mortgage type:

The IRD is where penalties can skyrocket. It’s calculated based on the difference between your original mortgage rate and the lender’s current rate for the remaining term. If rates have dropped significantly, this can result in a massive penalty. Not just a few thousand, I’ve seen penalties as high as $30,000 before.

For example:

• You locked in at 5% for 5 years but break your mortgage in year 3.
• The lender’s rate for a 2-year term is now 3%.
• The lender will charge a penalty based on the difference in lost interest—potentially tens of thousands of dollars.

This is why choosing the right mortgage term and flexible lender is just as important as getting the lowest rate.

What’s the Right Choice for You?

If you have long-term stability, a lower rate with a higher penalty might be fine. But if you have any uncertainty in your future plans, it may be worth paying a slightly higher rate in exchange for a lower penalty.

Questions to Ask Before Choosing a Mortgage

1. How long do I realistically plan to stay in this home?
2. Could my job require me to relocate within the next few years?
3. Do I anticipate major life changes (marriage, children, separation)?
4. Am I comfortable with the risk of paying a high penalty if I need to break my mortgage?

A mortgage is a long-term commitment, but life isn’t always predictable. By choosing the right mortgage structure, you can avoid costly surprises down the road.

Need Help Finding the Right Mortgage?

Not sure which option makes the most sense for you? Let’s talk. I can help you evaluate your options and choose a mortgage that fits both your short-term and long-term plans.

📞 Call us at 416-882-4172
📧 Email mortgages@dannycardoso.ca

Let’s find the right mortgage for you—one that works for your life today and tomorrow.

Is the Economy Going to Crash? What Canadian Homebuyers Need to Know

With new U.S. tariffs on Canadian goods already in place—and Canada retaliating with its own tariffs—many Canadians are asking:

• “Are mortgage rates going to go down in 2025?”
• “Is the economy going to crash?”
• “How will these tariffs impact home prices and affordability?”

These are valid concerns, especially for homebuyers, homeowners renewing their mortgages, and those considering refinancing. While we can’t predict the future with certainty, the Bank of Canada (BoC) is widely expected to cut interest rates in 2025 to help offset economic uncertainty. However, rising inflation and shifting trade policies could complicate how quickly and how much rates actually drop.

Here’s what you need to know about how these tariffs could affect Canada’s economy, mortgage rates, and home affordability in the coming months.

Will Mortgage Rates Go Down in 2025?

The Bank of Canada has been signaling rate cuts for months, but how low they go—and how quickly—depends on several factors:

• Tariffs are slowing economic growth – The new U.S. tariffs on Canadian goods, and Canada’s retaliatory tariffs on U.S. imports, are putting pressure on businesses and increasing costs for consumers. If economic growth slows significantly, the BoC may lower rates to keep borrowing and spending active.
• Inflation is still a concern – Higher tariffs often lead to higher prices for goods, which could drive up inflation. The BoC has to balance rate cuts with the risk of rising inflation, which could slow the pace of cuts.
• Global uncertainty adds risk – The U.S. election, ongoing geopolitical tensions, and financial market fluctuations all add unpredictability. If the economy worsens, rate cuts may come sooner and deeper than expected.

What Does This Mean for You?

Rates are expected to decrease, but we’re in uncertain times. If you’re thinking about buying a home, refinancing, or renewing your mortgage, the best approach is to lock in now with flexibility to adjust later.

Should You Lock in a Mortgage Rate Now or Wait?

Many homebuyers and homeowners are wondering whether they should lock in a mortgage rate now or wait for rates to drop further in 2025. The good news? Most lenders allow you to lower your rate if rates drop before closing.

Here’s why locking in now is a smart move:

• Locking in protects you from unexpected rate hikes – While rates are projected to drop, inflation or unexpected economic shocks could slow cuts or even cause rates to rise. Locking in now ensures you’re covered.
• Many lenders allow a rate drop before closing – If rates go lower before your mortgage is finalized, most lenders will adjust your rate accordingly. This gives you peace of mind knowing you’re getting the best possible deal.
• Economic uncertainty makes waiting risky – Tariffs, inflation, and global trade tensions all create uncertainty. Locking in now ensures you don’t miss out on today’s competitive rates while still giving you room to adjust.

Fixed vs. Variable: Which Mortgage Should You Choose?

If you’re debating between a fixed or variable mortgage, here’s what to consider:

If you’re unsure which option is best for you, let’s discuss your financial goals and find the right strategy.

Is the Economy Going to Crash? What This Means for Canadian Homebuyers

While Canada’s economy is facing major uncertainty, most experts do not expect a full-blown crash. Instead, we’re likely to see:

• Slower economic growth due to rising costs from tariffs and inflationary pressures.
• Lower interest rates as the BoC tries to stimulate economic activity.
• A cooling housing market in some regions, as affordability challenges affect demand.

The best thing you can do right now is stay informed and make proactive mortgage decisions that protect your financial future.

Let’s Talk About Your Mortgage Options

Navigating the mortgage market in uncertain times can be confusing, but you don’t have to do it alone. Whether you’re looking to buy a home, renew your mortgage, or refinance for a better rate, I can help.

📞 Call me at 416-882-4172 or email mortgages@dannycardoso.ca, and let’s create a mortgage strategy that fits your needs.