The mortgage you choose will likely be the largest financial commitment of your life. A small difference in rate or terms can cost — or save — you tens of thousands of dollars. Yet most Canadians accept the first offer they receive.
Here are 15 questions to ask every lender or broker before committing.
Rate questions
1. What is the rate, and is it fixed or variable?
This seems obvious, but make sure you understand:
| Rate Type | How It Works | Best When |
|---|---|---|
| Fixed | Rate locked for the entire term | You want certainty; rates are expected to rise |
| Variable | Rate fluctuates with prime rate | Rates are expected to drop; you can handle fluctuation |
| Adjustable | Payment changes with prime rate | Similar to variable, but your payment amount changes |
Also ask: Is this a discounted rate or your best rate? Lenders often have room to negotiate.
2. How long is the rate hold?
| Rate Hold | Typical Duration |
|---|---|
| Pre-approval rate hold | 90–120 days |
| Commitment rate hold | 30–60 days (after approval) |
A longer rate hold protects you if rates increase while you’re house hunting. If your hold expires, you’ll need to reapply at the current rate.
3. What term should I choose?
| Term | Rate (Typical) | Best For |
|---|---|---|
| 1 year | Lowest | If you’ll sell or refinance soon |
| 2–3 years | Moderate | If you want flexibility |
| 5 years | Standard | Stability and certainty |
| 7–10 years | Highest | Maximum rate protection |
Most Canadians choose a 5-year term, but shorter terms often have lower rates and more flexibility.
Prepayment questions
4. What are the prepayment privileges?
Prepayment privileges let you pay off your mortgage faster without penalty:
| Privilege | What to Look For |
|---|---|
| Lump-sum payment | 10–20% of the original balance per year |
| Payment increase | 10–25% increase to regular payments per year |
| Double-up payments | Make extra payments (some lenders) |
Why it matters: If you receive a bonus, inheritance, or windfall, generous prepayment privileges let you put it toward your mortgage penalty-free. Some lenders offer 10% while others offer 20% — that’s a $20,000 difference on a $400,000 mortgage.
5. Can I change my payment frequency?
| Frequency | Payments/Year | Interest Saved (on $500K, 5%, 25yr) |
|---|---|---|
| Monthly | 12 | Baseline |
| Bi-weekly | 26 | ~$0 (same total) |
| Accelerated bi-weekly | 26 | ~$30,000+ |
| Accelerated weekly | 52 | ~$32,000+ |
Accelerated options are the simplest way to pay off your mortgage faster. Make sure your lender offers them.
Penalty questions
6. What is the penalty for breaking the mortgage early?
This is the most important question most people forget to ask.
| Rate Type | Penalty Calculation |
|---|---|
| Variable rate | 3 months’ interest (straightforward) |
| Fixed rate | Greater of 3 months’ interest OR the Interest Rate Differential (IRD) |
The IRD penalty is where things get expensive. Ask specifically:
7. How is the IRD calculated?
| Method | Penalty Level | Who Uses It |
|---|---|---|
| Posted rate minus posted rate | Very high ($15,000–$30,000+) | Big 5 banks |
| Discount rate minus discount rate | Fair ($3,000–$8,000) | Most monoline lenders, credit unions |
Example on a $400,000 mortgage with 3 years remaining:
| Calculation Method | Approximate Penalty |
|---|---|
| Bank IRD (posted rates) | $15,000–$25,000 |
| Fair IRD (discount rates) | $3,000–$6,000 |
| 3 months’ interest | $5,000–$6,000 |
This single question can save you $10,000–$20,000 if you need to break your mortgage due to a job change, divorce, or sale.
Flexibility questions
8. Is the mortgage portable?
| Feature | What It Means |
|---|---|
| Portable | Transfer your mortgage to a new property if you move |
| Not portable | Must break the mortgage and pay penalties to move |
Portability is valuable if you might relocate during your term. Most lenders offer portability, but the terms and timelines vary (typically 30–120 days to complete the port).
9. Is the mortgage assumable?
An assumable mortgage lets a buyer take over your mortgage — rate, terms, and all. This is rare but can be valuable if you have a low rate and are selling in a high-rate environment.
10. Is this a collateral charge or conventional charge?
| Type | Impact |
|---|---|
| Conventional charge | Easy to transfer to a new lender at renewal; lower switching costs |
| Collateral charge | Registered for more than you owe; harder and more expensive to switch lenders; must discharge and re-register |
Who uses collateral charges: TD Bank registers all mortgages as collateral charges. Some other lenders do as well.
Why it matters: If your lender knows you can’t easily leave, they have less incentive to offer you a competitive renewal rate.
Cost questions
11. What fees are involved?
| Fee | Typical Amount | Who Charges |
|---|---|---|
| Appraisal fee | $300–$500 | Some lenders pass this on |
| Discharge fee | $200–$350 | Charged when you pay off or switch |
| Assignment fee | $200–$500 | If transferring your mortgage |
| Reinvestment fee | Varies | Some lenders charge this at renewal |
| Legal fee subsidy | -$500 to -$1,000 | Some lenders cover your legal fees |
Ask if the lender offers a cash-back incentive or legal fee coverage — these can offset closing costs.
12. Is there a mortgage cash-back option?
Some lenders offer 1–5% cash back at closing in exchange for a slightly higher rate:
| Cash Back | On $500K Mortgage | Rate Premium |
|---|---|---|
| 1% | $5,000 | ~0.10–0.15% higher |
| 3% | $15,000 | ~0.30–0.50% higher |
| 5% | $25,000 | ~0.60–1.00% higher |
Cash back can help with closing costs but usually costs more in the long run. There may also be clawback provisions if you break the mortgage early.
Renewal questions
13. What happens at renewal?
| Question | Why It Matters |
|---|---|
| Will I automatically be offered the best rate? | Many lenders offer posted rates at renewal — you must negotiate |
| Can I switch lenders without penalty? | Conventional charge = yes; collateral charge = more difficult |
| How much notice will I receive? | Lenders must send a renewal notice 21 days before maturity |
| Can I change my term at renewal? | Most lenders allow this |
14. Do you offer a blend-and-extend option?
A blend-and-extend lets you lock in a new rate mid-term without paying the full penalty:
| Feature | Details |
|---|---|
| How it works | Your current rate is blended with the new rate for the remaining + extended term |
| When it’s useful | Rates have dropped and you want to lock in lower |
| Penalty avoided | Yes — you avoid the IRD penalty |
| Trade-off | The blended rate is higher than the new rate alone |
Not all lenders offer this, and the blended rate formula varies.
The broker question
15. Why should I choose you over other lenders?
This is the question most people are afraid to ask. But it’s the most revealing.
A good lender or broker should be able to clearly articulate:
- What makes their rates competitive
- What their service model looks like after closing
- How they’ll help you at renewal
- What their penalty structure is (and why it’s fair)
If they can’t answer confidently, keep shopping.
Quick reference checklist
| # | Question | Answer |
|---|---|---|
| 1 | Rate (fixed/variable)? | |
| 2 | Rate hold period? | |
| 3 | Best term for my situation? | |
| 4 | Prepayment privileges? | |
| 5 | Payment frequency options? | |
| 6 | Penalty for breaking early? | |
| 7 | IRD calculation method? | |
| 8 | Portable? | |
| 9 | Assumable? | |
| 10 | Collateral or conventional charge? | |
| 11 | All fees? | |
| 12 | Cash-back option? | |
| 13 | Renewal process? | |
| 14 | Blend-and-extend available? | |
| 15 | Why choose this lender? |
Print this list and bring it to every rate comparison.
Related resources
- How to Negotiate Your Mortgage Rate — Negotiation tactics
- Mortgage Brokers vs Banks — Compare your options
- Mortgage Penalty Calculator — Estimate break costs
- Fixed vs Variable Mortgage — Rate type comparison
- Mortgage Calculator — Monthly payment estimates