Imagine that you finally got a mortgage, but suddenly found better conditions with lower mortgage terms and a longer amortization period. So, it doesn’t really matter what you decide to do, transfer your mortgage to another lender or refinance it with better conditions, there is a cibc mortgage discharge fee as well as other prepayment penalties or prepayment charges.
What CIBC Is?
CIBC, The Canadian Imperial Bank of Commerce, is a major bank in Canada. It is the sixth-largest bank in Canada by market capitalization ratio. CIBC, the huge corporation that is owned by the Government of Canada and it was founded on October 18th, 1889 as the Imperial Bank of Canada (IBC) and only a year later was incorporated under a federal charter.
CIBC has branches throughout Canada and Hawaii; it also has another branch in Bangladesh (Sylhet). The shares are traded on the Toronto Stock Exchange (TSX) under the symbol ‘CM’. CIBC also has operations in more than 50 countries. It is the first bank that established international banking operations, starting in Latin America.
CIBC was previously known as The Canadian Bank of Commerce, or simply “The Commerce” before rebranding with its current name in 1961. They were the ones who invented cheque guarantee cards and automated banking machine technology, also created Canada’s first credit card which was issued by the Canadian Bank of Commerce.
Needless to say, it is a very good bank that has provided mortgage loans to many clients in Canada.
Mortgages that are offered by CIBC are well known to the public due to the well-known commercials about their so-called “Great 5” mortgage program. This program consists of several options for consumers, including five different prepayment privileges, but many people might wonder what this really means or if there’s any catch in these terms.
Prepayment Charges in CIBC
Apparently, the charging of prepayment charges by banks or other financial institutions is a controversial issue that can’t be explained without taking a look at how it works. There are several kinds of charges that a bank can impose on you, including application fees for high-risk mortgages, discharge and registration fees.
Today, we are mostly interested in the cibc mortgage discharge fee. This is a fee, posed by a bank if you decide to break your mortgage contract early. It is a way in which a bank can profit and still gain money but instead of interest on your mortgage, it takes a special fee.
How Prepayment Penalties Are Calculated
Prepayment penalties are usually calculated as a percentage of your outstanding mortgage balance. The terms of the prepayment penalties differ from lender to lender, some would charge you a percentage of your outstanding balance and some would deduct a previously agreed amount from the whole amount.
The most common way a bank charges a borrower is as a percentage, they usually charge you anywhere from 1% to 5% based on the length of time left on your original term. The majority of the banks will be more lenient with prepayment penalties if you are into a longer-term, some lenders offer prepayment charges as low as 1.5% for an otherwise 10-year mortgage.
However, there are also some banks that impose more attractive prepayment penalties, especially for those who are hoping to sell their property soon. For example, CIBC offers you a $50 fee on top of any prepayment penalty imposed by the bank if you want to break your mortgage early.
Moreover, there are two ways prepayment can be calculated. It either:
- Interest rate differential (IRD), or the
- Three months’ interest
These two ways depending on the type of your mortgage fixed or variable. The overall price depends on your mortgage rate, remaining debt, and the place where your home is located. Now we will look at both types of cibc mortgage discharge fees in greater detail with examples. You can later use not only online mortgage calculators but also prepayment penalties calculators online (yes, there are calculators even like this!).
1 Example: Interest Rate Differential (IRD)
If you choose to prepay your mortgage early, the bank will charge you with the most common way of calculating prepayment penalties called “interest rate differential.” This is also known as IRD, which is achieved by using a formula like any other interest rate calculated on the outstanding balance.
For example, let’s take home a 2 year fixed mortgage at a 5.69% interest rate with a $350,000 purchase price. This means you can calculate the cibc mortgage discharge fee as the difference between two interest rates and the length of months you have left to pay off your current mortgage term. In this case, the lender will see how much money it will lose. And let’s say that today`s fee is 3.04%:
- (5.69% – 3.04%) / 12 = 0.0022
- 0.0022 х $350,000 х 24 = 18, 480$
- 18, 480$ + 260$ discharge fee if you live in Ontario = 18, 740$
As a result, you need to pay 18, 740$ prepayment fee. If I were you I would think twice before doing prepayment.
2 Example: Three Months’ Interest
In this variant CBIC uses Prime rate and as it follows from the title the interest for three months. Let’s leave the example with an overall mortgage amount of $350,000, but now your mortgage is variable and prime rate interest is 3.00%:
- 3.00% х $350,000 х 3/12 = 2,625$
- 2,625$ + 260$ discharge fee = 2, 885$
As it follows, in this case, is just 2, 885$ which is significantly less expensive than in the case with a fixed mortgage.
Penalty Fees Table
Here you can see a table with two types of other fees.
- discharge fee (what some in our industry call the “goodbye kiss.” They’re charged whenever you “discharge” a mortgage and leave your lender)
- registration fee (a fee for registering something officially)
| Registration Fee | |
| BC | 0.00$ |
| AB | 0.00$ |
| MB | 0.00$ |
| SK | 0.00$ |
| ON | 71.30$ |
| QB* | 0.00$ |
| NS | 0.00$ |
| NB | 71.30$ |
| PEI | 0.00$ |
| NL | 71.30$ |
| NVT | 0.00$ |
| NWT | 0.00$ |
| YK | 0.00$ |
| Discharge Fee | |
| BC | 75.00$ |
| AB | 75.00$ |
| MB | 260.00$ |
| SK | 260.00$ |
| ON | 260.00$ |
| QB* | 0.00$ |
| NS | 260.00$ |
| NB | 260.00$ |
| PEI | 260.00$ |
| NL | 260.00$ |
| NVT | 260.00$ |
| NWT | 260.00$ |
| YK | 260.00$ |
*Fees in Quebec are taken by the notary
Conclusion
In conclusion, it’s always better to pay your mortgage in full before the due date. It will save you from all of the troubles and you will be happy with yourself. But if you want to break the mortgage contract early it’s better to look at some online calculator for this.
In addition, if you ever want to get a mortgage from CIBC, make sure you can afford it because even if their fees are a little bit less attractive compared to other banks they still charge a significant amount.