Pitfalls in mortgage contracts

There are several important restrictions and hazards to be aware of when getting a mortgage, including but not limited to:

• High penalties (beware of bank penalty calculations)
• Unusual fees
• Restrictions on refinancing without penalty
• Restrictions on refinancing at all (before the term is up)
• Restrictions on porting your mortgage to a new home without penalty
• High blend rates (i.e., the rate you get when increasing your mortgage)
• High conversion rates (i.e., the rate you get when locking in a variable to a fixed rate)
• Monthly compounding (which is more expensive than semi-annual compounding)
• Prepayment limits (some lenders let you make lump-sum prepayments only once per year, or not at all!)
• Large clawbacks on cash-back mortgages that are broken early

Be aware of these limitations because they can cost far more than a lower rate saves you.