TD Canada Trust Mortgages
Mortgage Prepayment
Making a prepayment?
Learn more about your options by
exploring the most frequently asked
questions on mortgage prepayments.
How much will
it cost to make
a prepayment?
Your TD mortgage options are designed to give you flexibility to meet a wide range of financial goals and time frames. Before choosing your mortgage term, take a moment to review your options and ensure they match both your long and short term needs.
Fixed Interest Rate or Variable Interest Rate
- Your interest rate will not change throughout the entire term of your mortgage.
- You'll always know exactly how much your payments will be and how much of your mortgage will be paid off at the end of your term.
Rate
- Your interest rate may fluctuate from time to time because it changes when the TD Mortgage Prime Rate changes.
- If your interest rate decreases, your payment amount remains the same, but more of your mortgage payment is applied to the principal balance owing.
- If your interest rate rises, your payment amount remains the same, but more of your monthly payment will go toward interest.
- At certain times, you may be required to revise your payment arrangements. Please ask us for details.
Open or Closed
- Requires you to make set payments at set times but also lets you pay any amount toward your mortgage at any time, without having to pay a prepayment charge for doing so.
- Interest rates are typically higher for this privilege.
- Requires you to make set payments at set times and pay prepayment charges if you want to pay more than allowed, renegotiate or refinance your mortgage before the end of your term.
- Interest rates are typically lower for this type of mortgage.
Long Term or Short Term
- A long term mortgage is generally for three years or more.
- A long term mortgage is often the best choice when current rates are reasonable and you want the security of budgeting for the future.
- A short term mortgage is usually for two years or less.
- A short term mortgage is a good option if you believe interest rates will drop by your maturity date. Usually, the shorter the term, the lower the interest rate.
Home Equity Line of Credit
Fixed Rate Portion
- Requires you to make set payments at set times over a closed term and to pay prepayment charges if you want to pay more than allowed, renegotiate or refinance before the end of your term.
- Just like a fixed rate mortgage, your interest rate will not change throughout the entire term of your mortgage.
- You'll always know exactly how much your payments will be and how much will be paid off at the end of your term.
Your prepayment charge will depend on what type of mortgage you choose.
- You will not have to pay a prepayment charge if you decide to pay off your mortgage before the Maturity Date.
- If you decide to pay off your mortgage before the mortgage term ends (the Maturity Date), or to pay an amount greater than your allowable prepayment privileges, you may have to pay a prepayment charge.
- The prepayment charge is calculated as 3 months' interest.
- If you decide to pay off your mortgage before the mortgage term ends (the Maturity Date), or to pay an amount greater than your allowable prepayment privileges, you may have to pay a prepayment charge.
- The prepayment charge is the greater of 3 months' interest or an Interest Rate Differential (IRD) amount.
The IRD amount is equivalent to the difference between your annual interest rate and the posted interest rate on a mortgage that is closest to the remainder of the term less any rate discount you received, multiplied by the amount being prepaid, and multiplied by the time that is remaining on the term (see below for some examples).
- Make 1 or more lump-sum payments up to 15% of your original principal every year.
- Increase your payment amount by up to 100% of your original regular mortgage payment.
- Switch to rapid weekly or rapid bi-weekly payments and make up to an extra month's payment every year.
Whether you're paying off your mortgage in full because you are moving, or simply paying down your principal sooner, your TD mortgage gives you a number of options for prepaying without paying prepayment charges.
- Take your current mortgage interest rate and term with you to your new home – and avoid prepayment charges for paying off your mortgage before the Maturity Date (does not apply to Home Equity Lines of Credit with a fixed rate portion).
- Make 1 or more lump-sum payments up to a total of 15% of the original principal every year.
Choose an open mortgage
- Pay any amount toward your mortgage at any time, without having to pay a prepayment charge for doing so.
There are a number of ways to reduce prepayment charges when paying off a mortgage or Home Equity Lines of Credit with a fixed rate portion.
In many cases, you can reduce the prepayment charges that may be applicable when you payout and reduce the amount of interest you pay over time. Some examples of how you can achieve this are:
- Over the term, increase your monthly payment by up to 100% of the original regular mortgage payment
- Each calendar year, make one or more lump-sum payments of up to 15% of the original principal amount
- Change your payment frequency to a more frequent payment schedule
By reducing the principal balance of your mortgage, you will reduce the balance on which the Interest Rate Differential (IRD) or 3 months' interest is calculated.
Although it can sometimes seem confusing, TD uses a precise formula to calculate any prepayment charges you may be required to pay.
For a closed variable rate mortgage your prepayment charge is 3 months' interest (90 days), calculated on your remaining mortgage balance on the date of prepayment.
For closed fixed rate mortgages or Home Equity Lines of Credit with a fixed rate portion, your prepayment charges will be the greater of:
3 months' interest (90 days)
or
the Interest Rate Differential Amount
How to estimate Three Months' Interest (90 days)
D = Your estimated three months' interest amount
How to estimate the Interest Rate Differential Amount
The posted interest rate for a Similar Mortgage, less any rate discount received by you under the Mortgage
How to choose the right term and corresponding interest rate for your calculationThe amount you want to prepay
The number of months remaining on the term of your Current Mortgage
(C x D x E) ÷ 12 = F
F = Your estimated Interest Rate Differential amount
Payment timing & interest
Payment timing, payment amount and interest rate changes can have a big impact on your IRD amount calculation. Use the prepayment calculator to see how changes can impact your prepayment charges.
Prepayment charges are only paid when you choose to prepay the mortgage balance before the Maturity Date on a closed mortgage. With a little preplanning and by choosing the right mortgage options when you renew your mortgage, most charges can be reduced or even avoided.
The greater of:
3 months' interest
or
the Interest Rate Differential
Track the value of your annual prepayments carefully to ensure they don't exceed 15% of the original principal amount every year.
It is important to note that if you are prepaying in full prior to your maturity date, your 15% prepayment privilege will not be automatically applied.
Refinancing (increasing your borrowing amount) before the Maturity Date
The greater of:
3 months' interest
or
the Interest Rate Differential
When selecting your mortgage options, consider choosing an open or short term mortgage if you think you might want to refinance at some point in the near future.
Transferring your mortgage to another lender before the end of your term
The greater of:
3 months' interest
or
the Interest Rate Differential
Consider choosing an open or short term mortgage if you think you might wish to transfer your mortgage to another lender at some point in the near future.
Are there any other fees when paying off or paying down my mortgage or home equity line of credit with a fixed rate portion?
If you prepay your mortgage in full, other fees may apply.
Other fees
Reinvestment Fee
- If you prepay your mortgage in full during the first term (i.e. you never renewed your mortgage)
Mortgage Discharge Fee
- This is an administration fee for preparing the discharge request
Mortgage Assignment Fee
- This applies if you request to assign your mortgage to another financial institution, rather than a discharge
Cashback Reimbursement
- If you received a cashback payment in connection with your mortgage, you may be required to reimburse a proportionate amount. This applies in the following situations:
- You prepay the mortgage in full
- We assign the mortgage to another lender at your request
- You renew the mortgage and that renewal is effective before the maturity date of your current mortgage term
The amount of the Cashback Reimbursement is calculated as follows:
Administration Fee for Open Variable Interest Rate Mortgages
- This is an administration fee that is charged if you prepay your mortgage in full:
- first year = $500
- second year = $250
- after two years = $0
For complete details on additional fees, talk with your TD Canada Trust branch today or call us at 1-800-281-8031.
Applies to TD Canada Trust mortgages. If your mortgage is with TD Financing Services ("TDFS"), please consider the information provided above as a guideline only. Certain terms referenced above, including rate discounts, open mortgages, 100% increases in payment amounts and cashback reimbursements, are not applicable to TDFS mortgages. If you have any questions regarding prepayment options in respect of your TDFS mortgage, please contact us at 1 877 273 7498.
