Understanding that the fines for advance payments are not just about preparing potential fees for clients, which is an increasingly strategic advantage for mortgage brokers.
That’s what Matt Imhoff, founder of the Prepayment Tutor, was in a recent MPC Hosting webinar.
The broker himself, Imhoff, has built his reputation, helping other brokers decode interest rate differences (IRDs) and uses penalties insights to reveal early conversion opportunities, provide smarter advice and build long-term client trust.
Clear numbers
Many of the confusion surrounding punishment boils down to how IRD is calculated. As Imhoff explains, a fine on a fixed mortgage is usually three months of interest or a larger penalty in an IRD, which reflects what the lender says if the borrower ends their interest early.
“They lose interest” is based on the comparison rate of the lender set. Some use actual market prices, while others use artificially lower reinvestment rates to increase fines.
“The lower they can earn, the greater the IRD,” Imhoff said. “Some of these comparison rates don’t reflect the actual rates you can find in the market. That’s where the costs can really surge.”
Why timing matters
The key part of the meeting focused on how advance payment fines develop over time. As mortgages progress, lenders will not stick to a single comparison rate. Instead, they start at a 5-year interest rate based on the remaining term, then transfer to 4 years, 3 years, etc.
These shifts, known as “transition points,” could lead to unexpected jumps or drops in fines, depending on where the interest rate is at that time.
Imhoff shows examples of waiting for a show just a few weeks or earlier that can greatly change the fine. For example, a case study showed that the fine increased by $5,000 as lenders began using their 2-year comparison rate.
He said brokers who are these shifts can be expected to better guide clients when to move and when to hold.
Real examples of the scene
The webinar includes several realities based on brokerage experience:
- The 5-year period for a client’s remaining three years is fixed at 5.24%. The fine is only three months of interest, but is about to soar as the contract approaches a new comparison window. Brokers move quickly and save thousands of clients.
- Another document involves a single lender with a fine of $8,250. However, the 30-day wait will drop to less than $6,800, purely due to the transition to a one-year rate.
- CIBC mortgages starting in early 2023 are highlighted as current opportunities. Most still defaulted until three months of interest, even if there were more than two years left. However, the window may close quickly once it switches to a comparison with the price released for the biennium.
- CIBC mortgages starting in early 2023 are highlighted as current opportunities, but only if they have more than two years and six months left. Even if the actual interest rate is high (5% or above), most default to three months of interest (in the initially published interest rate). However, the window may close quickly once it switches to a biennial published interest rate, or CIBC lowers its 3-year 3-year posting rate above the market.
New tools for long-term problems
While all of this may sound complicated, there is now a tool to remove guesses from it. Imhoff leads his broker through the platform of his co-created advance tutor, which penalizes over 50 lenders and helps determine timing windows and saving opportunities before the renewal conversation begins.
Layered pricing offered by the prepayment fine tutor starts at $20 per month, with higher levels including advanced tools for refinancing comparisons and complete analytics. For Mortgage Professionals Canada members, this introductory price drops to $10 per month (up to 50%) and can be accessed by using their MPC login email.
CMT A closer look at the tools for March: Prepayment Penalty Trap: New Tool Helps Brokers Predict the Real Cost of Breaking a Mortgage
Everything comes down to
The more brokers understand how the advance payment fine works and how they change over time, the better the advice they provide, which can save customers and strengthen relationships.
“It’s not just saving,” Ehoff said. “It’s about managing expectations, building trust, and making sure your customers aren’t blinded by helping them see.”
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Last modified: July 30, 2025
