How do prepayment charges differ between a fixed and variable mortgage?

 

With a fixed rate mortgage, you can take advantage of a fixed interest rate throughout the duration of the term you chose. A variable rate mortgage is a mortgage loan where the interest rate is periodically adjusted based on an index.

Our variable interest rate consists of two components: a Tangerine percentage point spread and Tangerine’s Prime Rate. The percentage point spread Tangerine offers is guaranteed for the 5 year term. However, the Prime Rate can fluctuate at any time, and this will cause Mortgage rate and principal & interest payments to change. Tangerine performs a Prime Rate review every 3 months. For variable rate Mortgages, you can make a prepayment of up to 25% of your payment amount, which has to be applied towards the current principal and interest and not the original Mortgage amount. For fixed rate Mortgages, you can make a prepayment of up to 25% of your payment amount, which is calculated based on the original Mortgage payment amount.

With either a fixed or a variable Tangerine Mortgage, both offer the following features each Mortgage Year: Increase your payments by up to 25% of your original payment amount every year. Make lump sum payments totaling up to 25% of your original Mortgage amount on any payment date within a Mortgage Year.

Amortizations are available for up to 25 years. Skip a payment on our conventional mortgages. Payments over and above your prepayment privileges will result in a prepayment penalty charge. For variable rate Mortgages, this charge is equal to 3 months interest. For fixed rate Mortgages, the charge is either 3 months interest or the Interest Rate Differential, whichever is greater.