4 Month Late Payment - Help!

I made a incredibly stupid mistake and forgot to pay a balance of $60 on my BMO USD mastercard for 4 months! They didn't mail me any documents but have tired calling my house (not my work or cell phone) and since I've spent a lot of the last 3 months from home travelling so I haven't received any messages. I did clear out the balance and talked to BMO's lending department but they said they couldn't do anything about reversing it from my credit rating. My question is how will this affect my rating? They said it was a major. I have other cards (a RBC platinum Visa, a AMEX, A BMO Mastercard and a BMO LOC) and have never missed a payment with any of them. I'm 28 so I have about 10 years worth of credit history.

Is this a huge mark on my credit rating? Is there anything I can do? I'm freaking out a bit and any help would be appreciated.
Such a stupid thing to do over $60! 

The higher your credit score the more damage any late payment will do. It looks like you'll have a 90-day late. So yeah, that's gonna hurt. There was an article released recently of an interview with some executive who works for Fair Issac (the company that owns the FICO scoring system). They're tight lipped about how it works exactly, but he gave some hints and examples. And one example was the difference 1 single late payment makes for 1 person with good credit and 1 person with bad credit. And yeah, it hurts the good credit person worse.

Like, it might knock a 780 down to 720..or a 750 down to 710...or a 650 down to 630...or a 600 down to 590.

Did BMO cancel the account on you?

I'm really surprised they didn't try your cell and/or work number. My girlfriend didn't get her TD Visa statement a couple months ago, so she stupidly forgot to pay it (I just rolled my eyes). The day AFTER the payment was due they called the house. They left a message and then called her cell phone.

---

The score is just a number and often meaningless.

From my experience, a late payment such as OP's will not look that great on the CBR. I have seen applications get declined based on the fact that the individual had 90+ day late pymnt on one of the accounts and rest of it was perfect. 

Cashing joint bank draft in single bank account

My wife and I received a bank draft which is made out to both our names. Problem is that we don't have any accessible joint accounts - the only one we have is ING which means we have to mail it somewhere.

Can you deposit a joint cheque into a single person account if the other person signs something or is there in person?

Someone suggested getting your spouse to sign the back of the draft and then I can deposit it.

Anyone ever done this? 


If it says "or" between the names its okay.
If it says "and" theres a chance the teller will refuse to deposit it.
If both parties sign the back, you'll get away with it if you deposit it in a bank machine 90% of the time... unless there is a really picky person @ symcor (or whatever check processing 3rd party company your bank uses).

If the second party shows up @ the bank with ID to deposit it into your account... They'll most likely deposit it for you with no problems and if there is... The manager will usually let it slide if the second party shows ID.

superficial loss rules

I'm trying to figure out the superficial loss rules set by CRA...

if I'm frequently trading (or day trading) the same instruments,
what does it mean - that I cannot offset my profits with the losses?

would similar ETS's for example HNU:CA and UNG:US considered to be the identical instruments?

Any comments?
Thanks

Depends if it’s in accordance with http://www.cra-arc.gc.ca/tx/ndvdls/t.../menu-eng.html

Since those ETFs are on different exchanges, no, even though they are similar.  I believe it’s only counted the same if they are the same or can be converted from one to another, ie convertible debentures.

let me ask you this way

I buy and completely sell the same stock - this is a transaction

thru the year I make 100 transactions like that,
and they are always not more than 30 days apart

some of them get me profit and some get me loss

total sum of of positive transactions is $1,000
total of negative is $200

what is the taxable amount $1,000 or $800?

well technically say i assume they were all within 30 days and everything was accounted for with no mistakes.
your taxable income for this stock would be a 400 at your marginal rate as you would expect.

afaik the superficial loss is mainly to stop people from easily off setting their cap gains or potential future cap gains.  so say you have that 800 cap gain  but at same time you bought bby and you noticed it was sucking but didn't sell it. so you sell it and buy it back thinking you can use the cap loss to offset the 800 cap gain so year end you don't pay anything. but this rule only allows you to claim a superficial loss.

Pro-rated credit card fees?

Hi All,

I currently have an amex aeroplan card, I am not using it and want to cancel. will Amex give me a prorated refund on my annual dues?
If so is there a law in canada that they have to? 

 I recently called Amex about this very issue and the CSR indicated that they will refund the pro-rated (unused) fee.

---

the policy, in the card agreement, is they will not refund any annual fee if pts are awarded.

if they aren't awarded, i am unsure. i'm trying to get that done right now with MC so we'll see.

TFSA, stocks, and taxation - a tricky question

Hey!

Quick question about TFSAs. So I know that based on the 2009 changes to the TFSA, you can't contribute more to a TFSA per year than is allowed for that year even if you make 'withdrawals' that year (there's lots of information about this rule on the net).

BUT... what is a 'withdrawal'? Here's a scenario: Let's say you have $10000 worth of contribution room in 2010 and you put it all in a questrade TFSA (or any generic online trading TFSA) and invest it all in stock A. That same year, the stock value goes up so your stock are now worth $15000. You decide to sell the stocks because you expect it to drop and buy $15000 worth of shares in stock B (all in 2010).

So here's the question... does this constitute an over contribution? Is a withdrawal from your TFSA classified as (a) the actual selling of the stock OR (b) withdrawing cash from the amount. If it's the former, then my scenerio results in an over contribution. If it's the latter, then i haven't over contributed... and I can buy and sell shares within a TFSA in a single year without over contributing.

Tried to find the answer to this question and couldn't find it. Really appreciate your help! 


No it doesn't constitute as an over contribution.

b) Doesn't matter what you do in the account, what matters is what you transfer into the account and what you transfer out of it. Buying/selling stocks in a TFSA doesn't put money in or take money out of the account.

To clarify, a withdrawal would be considered as a transfer of cash or a security out of a tfsa to a non-tfsa.

question re: HBP

I am trying to figure out if I am eligible to use my RRSP money for the Home Buyers Plan.
Here's the scenario:

My wife bought a condo and used her HBP in 2005. We were not together at the time. We met in 2006. We were married in 2008. We've both lived in the condo to date and its our principal residence. My name is not on the condo (deed, mortgage etc.) but we do have joint financial accounts. I have never owned a home.

We intend to purchase a new principal residence in spring of 2011. We are unsure if we are selling or renting out the condo. The new home will likely be in both our names (but if I can qualify alone and this means access to HBP then that's preferable but not likely).

So, my question is - based on what I've described above - do I qualify as a "first-time home buyer"?

Reading this link is bloody confusing.

Specifically, my [now] spouse did own a home in 2007 (4 years before 2011) however we were not married in 07 but I was living with her, so I'm curious if that factors into things today?

my interpretation of that link is no.
because u lived in the same condo which she owns and is her principle place of residence as well as yours.
the 4-5 year thing applies after when you sell your home.
So you would not be eligible for Home Buyer Plan till 4 calendar years after selling the existing home and not live in a principal home during this time.

Quebec - 1000$ bonus from the company. 1000$ cash or 500$cash/500$gift card?

I know the majority are in Ontario but I'm unsure if bonus taxes work the same in Quebec.

I have the choice of having 1000$ cash or 50/50 split of 500$ gift card (for a choice of clothing store like AE, Hollister, Zara) and 500$ onto my paycheck.

Even if I take 1000$ to my paycheck and I get taxed almost 60%, don't I still get that amount back by the end of the year when the govt sends out the income tax cheques?

Or should I start an RRSP and dump it there?

if it matters, I'm 23, a part time student, working part time, earning less than $21k. 

I thought this was an interesting question as both are cash linked and the idea is to reduce the amount of taxes applicable from this bonus.  However according to Revenu Quebec gift cards are not considered a taxable benefit (up to a value of $500, see page 39).

http://www.revenu.gouv.qc.ca/documen...2010-10%29.pdf

Does cancelling your credit cards affect your credit rating?

I just applied and got a sears master card because it gave $10 off of my first purchase. But I have no real need for it as I already have a visa. It is a no annual fee credit card, so my question is does cancelling it right away or within a month have any negative consequences? Ie. bad credit rating etc.

Thanks 

Signing up:
You reduced the average age of accouts > Lower score
You added a recent credit file inquiry > Lower score
You decreased your percentage utilization > Higher score

Cancelling:
Would increase your average of accounts > Higher score
Would decrease your percentage utilization > Lower score
Doesn't change the fact that you had a recent inquiry > No effect relative to the current situation

Overall, if you cancel, you will be in a slightly worse position than you were at before you signed up. But it is quite marginal and will heal itself after some months. My advice is to just cancel it if you don't need it.

What's the best way to buy around 10k US dollars with Canadian dollars

Not sure if this has been asked before. I did a search but didn't really find anything. I currently have around 10k Canadian dollars in TD bank and want to buy US dollars since our dollar is higher now. On TD's website their current buying rate is .9763 which I think is kind of rip off. Is there any better way of doing this? Thanks. 

1) Use Knightsbridge or other equivalent foreign currency and bullion exchange companies. Their buy/sell rates are so narrow (especially when trading large amounts like you're planning to do).

2) CALL the bank you want to do the exchange with and haggle for a better rate. In fact, the TD bank officer through whom I opened my USD borderless account encouraged me to do this whenever I want to exchange a large amount of money.

3) Norbert's gambit

Personal residence exemption

Can two spouses each declare their own personal residence for tax purposes when a house is sold? I'm not asking this so that a couple could effectively avoid taxes on the cap gain on two homes but thought that each person could claim their own exemption somehow.

The short answer is no. Have a read of this page from the CRA talking about the principal residence exemption.

http://www.cra-arc.gc.ca/tx/ndvdls/t...ng/mr-eng.html

Capital Gains and Tracking Adjusted Cost Base

So with tax time coming around again, I've started doing a little research into determining capital gains. I've only now realized after doing taxes for decades that your T3s and T5s don't in fact include capital gains from sales of stocks but only track disposition of stocks inside the trust of the mutual fund. After speaking with many friends and family, this is apparently news to them too. Luckily I've never sold shares in the past.

Is this even right? Am I really supposed to keep track of my adjusted cost base every week from my preauthorized purchase plan for a possible 30-50 years before selling my non-RSPs? Why doesn't my mutual fund company track my ACB for me? If this is true, I don't know anybody that tracks this.

Somebody please enlighten me. 

Yes, you know all those T3s you got over those 30+ years that reported return of capital on distributions
there are i believe different methods you can use, i would ask a tax professional and bring in the shoe box of t3 slips.  T5008s are for stock capital gains. Most of the time you have to keep track yourself and report to CRA manually.

---

 There will be a box on the T3 that represents a return of capital. The ROC amounts reduce the ACB of the of the mutual funds you hold in that trust. You have to take the ROC amounts into account when determining the eventual gain or loss on a mutual fund dispostion.

Your brokerage should give you a year-end trading summary that should give you a starting point for reporting your gains and losses. Please note though - the gains or losses it shows are often incorrect as they don't track things like average cost. They are usually good for the proceeds part, but use your own ACB's.

Can capital losses be used to cover owing on RRSP sale?

Ok, so the question, I sold some RRSPs (under 5000$) so of course, I will owe money on taxes, approximately 1100$ to be exact. At the same time, I have approximately 1000$ in capital losses for 2010 on a terrible investment. My question is, can I take those capital losses and put them against the RRSP? I am fairly sure the answer is no- but when I had last checked it was for losses that had been carried over and not from the same year.

Thank you

And before people start asking why I sold RRSP's - it was probably the best decision I've ever taken. It helped me turn my finances around. My savings account has never been higher and we are now paying 33% extra on the mortgage each month since it allowed me to pay off all my debts. And with the markets going up nicely, my account is STILL higher than it was at the start of 2010 since I only sold the gains. 

No, a net capital losses can only be applied to offset net capital gains and not other types of income like RRSP withdrawals. They can be applied to previous years or carried forward however, so they aren't "lost" if you can't use them this year.

The exception would be if you were a day trader and was taxed as such.

Question about Paying of CC Balance w/ Credits

I have a quick question, don't know if anyone has the answer to it.
I currently have TDCT Credit card if it matters.

Let's say my January Bill is $1,000.00 and I want to pay it all off without incurring interest.
If I receive a $500 Credit (for a return, or something else) I only have to $500 to reduce my balance.

However, lets say my January Bill is $1,000.00.
I then purchase an item for $500.00 in February, but return it the following day. My account shows a $500 credit on my account.
Can I pay only $500 in January (because I have the $500 Credit and the system shows that I technically received a $500 Credit, and then I pay the other $500 in March) or do I still need to pay the full $1,000 in cash (not using the Credit).

Just curious, my December Bill got completed screwed up with so many credits, that it's tough to keep track. 

Yes it should work. Credit cards can give you an infinite free loan of at least half your credit limit. With RBC, after my statement has been issued, I've booked a refundable hotel room or airline ticket for the amount owing on the statement then canceled it the next day. The credit would count as a payment, and the original amount would be payable again next month. If you do this over and over each month, you can put off having to pay off your card without incurring interest charges. The bank reports you as having paid on time, and I never received a complaint from them about it. It's only a hassle of booking and canceling each month.

CRA Assessment

I was reassessed from the CRA and need to pay about $1500, with about 50% of that comprising of penalties and interest. I understand that you are able to contest the decision by writing a letter to the tax center. Anybody have any experience with this? Any advise?

thx 

If you want to object to the assessment, you should file a notice of objection within 90 days of the mailing date of the assessment. Use form T400A and explain why you are objecting.

http://www.cra-arc.gc.ca/E/pbg/tf/t4...DME.html?=slnk

---

True, but it is a good idea to actually pay the amount they say owing first, and then file for objection. This is because, during the objection period, their collections department is stayed, but the interest keeps piling up. The CRA works very slowly, btw. If you eventually lose the objection, you will have to pay an even larger amount in interest! But if you win, they have to give the money back with interest. 

so different score between equifax and trans union

recently I checked my credit report the score between trans union and equifax was so different. Trans Union was only 575 but Equifax was 659 . Can someone tell me why??? 

Both of these bureaus would not have exact same scores but should have similar scores. The reason being, not all lenders report to both credit bureaus. Some report to both, some report to Equifax only and some lender would report to TransUnion only. So, see your reports carefully and find out which of the lenders reported to TransUnion but not to Equifax and see if there is any unfavorable reporting or any late payments by these lenders which is causing the huge gap.

when can you contribute to this year's tfsa???

Hi,

I was wondering if you can start contributing another 5000 into your tfsa account since its a new year.


thanks 

jan 1st, 5000 is added to your contribution room.

Mortgage Renewal and Legal Fees

Can anyone shed some light for me?

When refinancing a mortgage at the end of a term would the client or mortgage broker typically pay legal fees?
Just finished 5 year term with traditional bank, looking at taking out equity in rental and moving to another 5 year term via lender through mortgage broker.

Thanks in advance. 
 

If you are switching lenders or increasing the mortgage amount so as to get more cash out of your home, then you will have to pay legal fees.
If you are staying with the same bank and not refinancing to a greater amount of money, no legals will be necessary.

You can try to work a deal to get the new lender to pick up the cost of the legal fees. I've switched lenders twice now and never paid any extra legals. 

When to walk away from a mortgage?

I bought an investment condo, which really didn't pan out.
I can still afford payments (in fact monthly cashflow from tenants covers entire mortgage (PIT)) but I'm worried about potential water pipes breaking, or interest rate rises.

To throw some numbers out there.
Purchases for 230.
Mortgage principle 175.
Saw one listed today for Current price 160k

I've been doing lots of reading online, about the benefits of walking away, but many pertain to american markets. Some say you have bad credit for 3 years then you're in good standing again.

What are my options?

1) Sell at a loss. Claim loss of capital gains for a few years (avoids having to buy rrsps)?
2) Suck it up, pay bare minimum into mortgage, hoping to have it pick up in 5 years, (sell at a smaller loss in the future)..
3) Suck it up, pay off mortgage asap. (Just feel like I'm throwing good money into bad with this option).
4) Default on payment. Foreclose property, take a big credit hit.

Any other thoughts?
If I do option 4, and a bank short sales, would they come after my other assets to cover the balance?

TIA

1) Sell at a loss. Claim loss of capital gains for a few years (avoids having to buy rrsps)?

You can only claim capital losses against capital gains, except if you die or go bankrupt, in which case, you can offset income with a capital loss.

2) Suck it up, pay bare minimum into mortgage, hoping to have it pick up in 5 years, (sell at a smaller loss in the future)..

For 'just' a $15k deficiency, probably one of your better options, unless your local market is oversaturated with a lot of supply. Are there a lot of vacant houses or not? You say Edmonton, right, there's not a lot of overbuilding there, is there?

3) Suck it up, pay off mortgage asap. (Just feel like I'm throwing good money into bad with this option).

You owe the debt, and you have to pay. Either way, the bank is getting their money. Short of bankruptcy, there is very likely no way out.

4) Default on payment. Foreclose property, take a big credit hit.

And get sued for the deficiency.

If I do option 4, and a bank short sales, would they come after my other assets to cover the balance?

Generally, yes. If you're in Alberta, and you put a >20% downpayment you may be able to walk away without making up the deficiency. Right now, you're in $15k negative equity, which isn't worth trashing your credit and your reputation over, that's for sure. If you truly have a non-recourse mortgage in Alberta, and you are still cash-flow positive, then why not just keep running the property? It really doesn't matter if you end up defaulting on $15k or $100k -- the hit to your credit record, in both circumstances, is equal. And who knows, maybe there will be some upside of government incentive programs or loan forgiveness programs in the future, who knows.... Especially when all of Canada is severely down the same path.

http://www.blakes.com/english/view_disc.asp?ID=1232

---

A capital loss can be carried over the years but can only be applied against a net capital gain.

2) seems like the best option, your credit score is maintained and you remain cash flow positive.
interest rates most definitely rise.

Big risks you face are in the renewal of the loans, especially since they may ask you to disclose everything you have, and, when they see the negative equity in the one property, ask you for a higher interest rate. So getting rid of the property right now, and only taking a $15k hit, might be preferable. You really haven't given a lot of information on your overall finances to say, one way or the other. Also, coming up with an optimal plan requires many assumptions.

Espp & tfsa

I'm not sure if this is possible but is there anyway of creating TFSA to take advantage of ESPP through work. This and RRSP are main source of saving money. Because grant price is lot lower I have made large income through just the difference between grant price & stock price. I believe I have made this past year about $7-8K through this method and I believe that during tax season I will have pay marginal tax on that amount.

So is there anything I can do to take advantage of this? I still haven't sold and plan on selling shortly (unless there is tax advantage to not doing it). I continue to invest in ESPP, so is there anything I can do in the future to lower my taxes, even if it is not through TFSA?

A lot of companies offer their ESPP to go directly into an RRSP, but I don't believe many have gotten on board with TFSA yet. Regardless, you'd still be taxed at your MTR on the company's contributions, the benefit of the TFSA is that you would only have one number on your T4PS as there would be no tax on dividends. Depending on how the ESPP is set up there's probably some way you can transfer stock into a brokerage TFSA. Otherwise, sell and then repurchase in a TFSA.

All that being said, if this is a Canadian dividend paying company, the TFSA probably isn't the best location for the stock anyway, as capital gains and dividends are very tax efficient.

Over contributed to stock-based TFSA, what happens?

Hello all, so I misread my tax statement and thought that was my contribution room for the year from that pt forward, and not from the beginning of 2010. So I over contributed a little bit (under 1K, not a huge amount).

I know that the amount you over contribute is taxed for x number of months remaining in the year. Because I moved it into my TD waterhouse TFSA, and bought stocks with the money, I was just wondering how they calculated the tax I owe. Do they merely tax the amount you over-contributed, or do they tax gains also?

TIA

They only tax the amount of the over-contribution. If you move the over contributed money out of the TFSA now you will only be taxed 1% of the amount over the limit (if it were $1000 over, then we're talking $10).

---

Any gains directly as a result of the over contribution are removed because it becomes 100% taxable.  if such amount if withdrawn it is not added back into the contribution room next year.

Education/Tuition Tax Credits

How do the tax credits for paying tuition work? I have about 15,000 leftover from last year.

If I make 50k in 2010, would I then only be taxed on 35k?

It does not reduce your taxable income such as RRSPs do, it just applies a credit against the taxes you owe.

You would still be taxed on 50K, but a credit would be applied to the taxes you have to pay.

Djino

---

That's definitely not how it works.  Your tuition credit is split into 2, federal and provincial which reduce the respective tax payable to 0 if applicable if you have enough tuition credits.
in this case your credits will have to be used when you do your taxes and will be reduced to 0.

AMEX Student Cards in Canada

Hey,
Does anyone know if American Express offers any student cards in Canada? In other words, card where you would normally require say $15,000 annual income, but that would be waived for students.

I know I've read here MBNAA does that, where it's not advertised but they waive the annual income requirement so long as you're a student. I know TD does that as well with their higher end cards.

An AMEX card might be nice to have, but I can't find anything online that would indicate it's possible for me.

Thanks.

no amex does not waive any requirements for students.

Question on Home Buyer Purchase Plan (HBP) Withdrawal

I have recently purchased a house and just want to make sure I interpret the HBP withdrawal guideline correctly.

For my house, the contract was signed on Sep 2010, with expected closing date in Oct 2011 (but probably would delay to early 2012). When's the earliest and latest time I could do my RRSP withdraw ? Does the closing date matter ?

Please advise. 


 In order to get correct information and answers to this and other questions related to HBP, please follow this link http://www.cra-arc.gc.ca/tx/ndvdls/t.../menu-eng.html and from the guide http://www.cra-arc.gc.ca/E/pub/tg/rc4135/rc4135-e.html


In order to keep things simple;

Generally all the HBP withdrawal should be done in the same year. However, CRA would also consider any withdrawal done in January of next year to be done in the earlier year if all other conditions of HBP are satisfied.

So, if you have not done any HBP withdrawal so far, you should be doing all the withdrawals in 2011 or the last withdrawal should be done no later than January, 2012.

The closing date does matter. If you are doing HBP withdrawal in 2011 then the qualifying home should be ready for possession before Oct 1, 2012. So, you should be fine if you do all your HBP withdrawals in 2011 or the last withdrawal latest by January, 2012.

One more question though, what if the closing date is delay due to the builder and being pushed to Mar 2012? Will I get into trouble if I made my withdraw in Jan 2011 in this case ?  

You would be fine if you have a vaild purchase contract with the builder (dealing at non arms length) at the time of the RRSP withdrawal and the delay is on part of the builder because of unforeseen circumstances.

The guide has answers to all the questions. Here is the relevant portion:

Extensions for buying or building a qualifying home or replacement property

If you do not buy or build the qualifying home you indicated on Form T1036 (or a replacement property) before October 1 of the year following the year of the withdrawal, we still consider you to have met the deadline if either of the following situations applies to you:

You had a written agreement, in effect on October 1 of the year following the year of the withdrawal, to buy a qualifying home or replacement property, and you buy the property before October 1 of the second year following the year of the withdrawal. In addition, you have to be a Canadian resident up to the time of purchase (see Example 1).

You had paid an amount after the date of the first withdrawal and before October 1 of the following year to the contractors or suppliers (with whom you deal at arm’s length) for materials for the home being built, or towards its construction, that was at least equal to the total of all withdrawals under the HBP (see Example 2).

Example 1

On February 10, 2008, Steven, a Canadian resident, entered into an agreement to buy a duplex, the ground floor of which he intends to occupy as his principal place of residence. Because of an existing lease, the possession date is May 4, 2010. On February 20, 2008, Steven withdrew $15,000 from his RRSPs under the HBP. On May 4, 2010, he takes possession of the duplex and moves in.

Since Steven withdrew his funds in 2008, he had to buy the home before October 1, 2009. Although Steven took possession of the home after this deadline, we consider him to have bought the home by the deadline because he had an agreement in effect on October 1, 2009, he bought the home before October 1, 2010, and he was a Canadian resident when he bought it.

Example 2

In January 2009, Clara withdrew $10,000 from her RRSPs under the HBP. Earlier in the same month, she had finalized a contract to have her home built. She paid $7,000 when construction started in April 2009, and $6,000 more in August 2010, for a total of $13,000. Clara dealt at arm’s length with the contractor.

Construction of the home is not completed until December 15, 2010, because the building materials arrived late.

Since Clara withdrew her funds in 2009, she has to have the home built before October 1, 2010.

Although construction of the home is not completed until December 15, 2010, we consider Clara’s home to have been built by the deadline because the $13,000 she paid towards its construction before this deadline is more than the total amount of her withdrawals ($10,000), and because she dealt at arm’s length with the contractor

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.