Prepayment after term ends on mortgage?

I have a question regarding mortgage payments that should have a simple answer, but couldn't find a solid response.

Let's say you are coming up to the end of your 5-year mortgage term on a closed fixed-rate. You plan to refinance with another
lender, also on a closed term.

In that window between terms, would you be able to prepay (without limit directly towards principal) without any penalties from either lender? 

  

YES. You can do it easily without any penalties from either lender at least in 2 different ways.

First, tell your existing lender to keep your mortgage open after the maturity of the term till such time you transfer it to another lender and during the intervening period any amount you pay would not entail any penalty;

Secondly, when you transfer a mortgage to another lender, get an approval for a lower amount and the lawyer or the First Canadian Title would take the difference amount from you in a certified cheque and pay it to your existing lender along with the money received form your new lender. For example, when your mortgage comes up for renewal the amount is $200,000 and you want to pay $25,000 and want to refinance/renew only $175,000 then let the new bank know that the balance of mortgage is $200,000 and you would be getting new mortgage for only $175,000 and paying $25,000 from your pocket to reduce the new mortgage before start and the lender would only approve you for $175,000 and the lawyer/FCT will pay your existing lender $200,000 by taking $25,000 from you and your new mortgage would start with $175,000 with the new lender.

 

 so you can actually prepay with no penalties and without refinancing upon renewal?

 

 The mortgage becomes open after the expiry of the term. However, every lender has a different policy. Some will send you a renewal offer with their rates and if you DO NOT sign back on the rates and term offered, some would keep it fully open with higher rates while some would automatically renew the mortgage for either a 6 months or a 1 year term. However, if you are switching the mortgage or doing a refinance, the lawyer or the FCT would ask a pay out statement from the existing lender which is generally valid for 30 days and at that time also the mortgage is treated as fully open with the existing lender and your liability is to pay the mortgage amount balance plus daily interest on the balance till such time the mortgage is switched to another lender. During this intervening period, you can pre pay any amount with out any penalties.

 

 I was curious about something, once the renewal becomes due how long does a person have till it has to be renewed?  Say I wanted to renew with the same bank and i received their form but didn't sign it yet as well i tell them not to auto renew and to keep it open. so it's still currently accumulating interest at maybe a higher rate.  also are there any fees applicable if i lump sum pay it down once the term expires and then renew?

 

Typically if a mortgage is not paid in full by making a balloon payment after the expiry of the term, it has to be either switched to another lender or renewed with the same lender. And this renewal of term starts from the very next day of the last day of the existing term. However, as mentioned earlier, if you ask the bank to keep the mortgage open, then in fact it would be considered as if the mortgage is renewed with the OPEN TERM. Or, Alternatively, your lawyer or the FCT asks for the pay out statement which is generally valid for a maximum of 30 days from the date issued and at that time the mortgage is considered open and you have to pay a daily interest on the balance.

So, in your example if you ask the bank to keep the mortgage open, they will do so at a higher rate and can keep it open till such time you want to keep it that way. There are no penalties if you pay it out completely any time when it is in 'open state' but the bank may (will) charge you a 'discharge fee and or any applicable admin fees.