1. What is the RMG Mortgage Penalty?

The RMG mortgage penalty is calculated when you break your mortgage contract before the end of its term. It compensates the lender for interest rate differential losses.

2. How Does the Calculator Work?

The calculator uses the RMG penalty formula:

Where:

• \( Balance \) — Current mortgage balance in CAD
• \( Rate\ Diff \) — Difference between your rate and current rate (in decimal)
• \( Term \) — Remaining term in months

Explanation: The penalty is proportional to the mortgage balance, the interest rate difference, and the remaining term.

3. Importance of Penalty Calculation

Details: Understanding potential penalties helps in making informed decisions about mortgage refinancing or early termination.

4. Using the Calculator

Tips: Enter your current mortgage balance in CAD, the rate difference as a decimal (e.g., 0.025 for 2.5%), and remaining term in months.

5. Frequently Asked Questions (FAQ)

Q1: How is the rate difference determined?
A: It's the difference between your current mortgage rate and the lender's current rate for a similar term.

Q2: Are there other types of mortgage penalties?
A: Yes, some lenders use the "three months' interest" method or the greater of that and interest rate differential.

Q3: Can penalties be negotiated?
A: Generally no, but some lenders may offer penalty discounts in certain situations.

Q4: When are penalties typically charged?
A: When you break your mortgage contract before maturity, either by selling, refinancing, or switching lenders.

Q5: Are penalties tax deductible?
A: In some cases, if the penalty is paid in connection with income-producing property, consult a tax professional.