Real Estate

Variable Rates IRD Penalty

  • Last Updated:
  • Aug 22nd, 2021 8:23 am
[OP]
Sr. Member
Feb 27, 2010
758 posts
391 upvotes

Variable Rates IRD Penalty

I’m about to finish my 5 year fixed rate at CIBC and I’m going to shop around…I asked my financial advisor over there and asked what would be the penalty if I went with 5 year flex variable and he said it’s either 3 month interest penalty or ird(interest rate differential)…
I always thought variable would be only 3 month interest penalty or am I wrong? Or is he wrong?
Can I sign say with CIBC for 5 year variable flex and go with another mortgage and pay only 3 month penalty?so confused
9 replies
Deal Addict
Jul 3, 2007
4050 posts
4532 upvotes
Toronto
juve4lfe wrote: I’m about to finish my 5 year fixed rate at CIBC and I’m going to shop around…I asked my financial advisor over there and asked what would be the penalty if I went with 5 year flex variable and he said it’s either 3 month interest penalty or ird(interest rate differential)…
I always thought variable would be only 3 month interest penalty or am I wrong? Or is he wrong?
Can I sign say with CIBC for 5 year variable flex and go with another mortgage and pay only 3 month penalty?so confused
hes wrong , which is scary.... its 3 months interest only , just go on the cibc penalty calculator online
[OP]
Sr. Member
Feb 27, 2010
758 posts
391 upvotes
joepipe wrote: hes wrong , which is scary.... its 3 months interest only , just go on the cibc penalty calculator online
That is scary…I was so sure but he cast doubt with me…so if I sign for 5 year variable flex mortgage and wanna transfer my mortgage somewhere else 1 year in…then for sure only 3 months interest only?
I hate my guy…every time he talks I feel he’s full of it…looking for a new advisor

Also a question about variable flex rate mortgage…do your payments stay the same throughout the 5 years or does it change for every BOC increase or decrease to the bank of Canada prime rate?
Deal Addict
Jul 3, 2007
4050 posts
4532 upvotes
Toronto
juve4lfe wrote: That is scary…I was so sure but he cast doubt with me…so if I sign for 5 year variable flex mortgage and wanna transfer my mortgage somewhere else 1 year in…then for sure only 3 months interest only?
I hate my guy…every time he talks I feel he’s full of it…looking for a new advisor

Also a question about variable flex rate mortgage…do your payments stay the same throughout the 5 years or does it change for every BOC increase or decrease to the bank of Canada prime rate?
yes 3 months 100% and yes stays the same
Sr. Member
Oct 14, 2010
570 posts
597 upvotes
Toronto
3 month's, their online penalty payment calculator is pretty good.
Remember that the 3 month interest in their case is equal to prime and not your actual interest.
[OP]
Sr. Member
Feb 27, 2010
758 posts
391 upvotes
joepipe wrote: yes 3 months 100% and yes stays the same
If it stays the same then why even go for fixed rate then if it’s 0.85% higher then variable?

Say u get 1.60% variable rate 3 year and prime rate goes up 0.25%…the payment stays the same why do people go with fixed if it’s higher?
Deal Addict
Jul 3, 2007
4050 posts
4532 upvotes
Toronto
juve4lfe wrote: If it stays the same then why even go for fixed rate then if it’s 0.85% higher then variable?

Say u get 1.60% variable rate 3 year and prime rate goes up 0.25%…the payment stays the same why do people go with fixed if it’s higher?
no idea, variable is better
Deal Addict
Mar 3, 2018
3017 posts
3382 upvotes
GTA
juve4lfe wrote: If it stays the same then why even go for fixed rate then if it’s 0.85% higher then variable?
The monthly payment can stay the same but make sure your variable mortgage allows it as many don't.

With the inflation rate rising significantly it is only a matter of time before interest rates rise. Question is how high and how fast and your risk tolerance.
Newbie
Jul 27, 2020
81 posts
96 upvotes
Banks are crap, and so are financial advisors. No one cares about your money except you. Question is are you willing to put in the time in order to make more money? Clearly this guy is not. Next guy given the industry is likely not gonna know much either. Good luck with that
Deal Addict
Jun 18, 2020
2625 posts
3149 upvotes
juve4lfe wrote: If it stays the same then why even go for fixed rate then if it’s 0.85% higher then variable?

Say u get 1.60% variable rate 3 year and prime rate goes up 0.25%…the payment stays the same why do people go with fixed if it’s higher?
They believe the future variable rate will go higher than the current fixed. If variable offered is 1.6 and fixed is 0.85 higher, so 2.45, someone might believe the rates will go up to 3 or higher within the next 5 yrs. So they lock in at 2.45.

As for the payment staying the same, do remember the payment is the same but the amount of interest vs principal within each payment changes as the rate changes.

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