Military Mortgage Penalties: The Costly Trap Most Don’t See Coming

1. The Hidden Cost of Every Posting

Every posting feels like déjà vu — new city, new house, new mortgage paperwork. But one line in that mortgage contract can quietly strip you of $5,000–$20,000 when you move: the early repayment penalty.

If you break your mortgage before the term ends — even for a posting — your lender can hit you with fees that crush your equity. It happens every year to members who didn’t know how to protect themselves.

2. What Mortgage Penalties Really Mean

A “mortgage penalty” is a fee for breaking or paying off your mortgage early. Most banks calculate it as either three months’ interest or the interest rate differential (IRD) — whichever is higher. If you still owe $350,000 and rates have dropped, your “IRD” penalty could be $10,000–$15,000.

The penalty itself isn’t unfair — but being posted across the country and forced to pay it is. That’s where “military clauses” and relocation policy come in.

3. Why Military Families Are Hit Hardest

You don’t get to choose your posting date. When orders come, you move — sometimes years before your mortgage term ends. That means:- You sell earlier than expected.- You break your mortgage.- You lose thousands unless your lender or the relocation directive protects you. And not all lenders are equal. Some quietly refuse penalty waivers unless you ask for them by name or prove you’re being posted. The Canadian Forces Relocation Directive (Chapter 8) confirms members can be reimbursed for certain penalties tied to official postings — but only if you meet exact criteria. (CAF Relocation Directive)

4. The Good News: Military-Friendly Mortgage Options Exist

A growing number of lenders now build “posting protection” into their products. The problem is, most members never hear about them. Here’s how to position yourself smartly before your next move:

A. Choose a Military-Friendly Lender

Some banks openly support military mobility for example BMO Canadian Defence Community Banking – waives prepayment penalties when members are officially posted (BMO CDCB)- Military-focused mortgage agents such as the ones here at RelocatingMilitary.ca– can negotiate clauses that protect you if you’re reposted.

B. Make Portability a Non-Negotiable

A “portable mortgage” lets you transfer your existing rate and term to a new property. No break, no penalty — just a smooth move. If your lender doesn’t offer it, you’re at risk. (Mortgage Forces)

C. Use the Relocation Directive to Your Advantage

If you must break your mortgage because of a posting, Chapter 8 of the Directive can reimburse eligible penalties. Keep your posting message, receipts, and correspondence — the paperwork matters.

5. Six Steps to Protect Yourself Before the Next Posting

- Review your mortgage today — check for words like portable, prepayment, or penalty waiver.

- Ask your lender in writing: “Do you have a Military posting clause that waives penalties?

”- Keep proof of postings — official message, emails, correspondence.

- If selling, align with relocation benefit windows so reimbursement applies.

- If buying, work with a Military-experienced mortgage pro from our Mortgage Team who understands both the lender side and the relocation side.

- Save all receipts — penalties, legal fees, appraisal costs. They’re often reimbursable.

6. Mistakes That Cost Members Thousands

- Signing a closed mortgage before knowing your posting schedule.

- Assuming all banks automatically waive penalties.

- Not documenting relocation properly for reimbursement.

- Breaking your mortgage mid-term without exploring portability first. Each of these can turn into a 4-figure mistake. But each one is preventable.

7. The Smart Way Forward

You protect your country — now protect your finances. Plan ahead, choose the right lender, and use your relocation benefits to full effect. View a list of vetted Mortgage Lenders here.

Don’t over-pay for your posting.

Use the relocation tools to see your benefits and entitlements.