The Importance Of Choosing The Right Product – Family Penalized $17,000 For Breaking Mortgage

November 17th, 2014

An Edmonton couple say they were shocked when their bank manager told them it would cost $17,000 for them to end their five-year fixed mortgage early.

Shane and Joy Trusz say they were expecting to pay a penalty of three months interest, which would have been less than $4,000.

Under the mortgage contract, TD Canada Trust had the right to calculate the penalty using either three months interest or the Interest Rate Differential (IRD).

The IRD is based on a complicated mathematical formula that includes the principal owing, the months remaining on the mortgage’s term, and a comparison of the interest rate the client is paying versus the rate the bank would charge for the remainder of the term.

Even after using TD’s IRD calculator, Shane Trusz said he couldn’t understand the amount TD was going to charge.

“We came out with a figure, it was about $7,000,” Shane Trusz said. “So, how is TD coming up with $17,000? I have no idea.”

Trusz said he expected TD Canada Trust, with whom they have banked for almost 20 years, to make an exception in their case, because they are selling their possessions to do humanitarian work.