The Honourable Jim Flaherty, Minister of Finance, today released a consultation paper that proposes to give businesses more flexibility in negotiating mortgage terms with lenders.
Under the Interest Act , only corporations and joint stock companies can negotiate with lenders the penalty for paying off a long-term mortgage sooner than agreed. All other mortgage holders must pay a mandatory penalty of three months of interest when they pre-pay the full amount of the mortgage.
“Some lenders are reluctant to provide financing to businesses not structured as corporations, such as partnerships or trusts, since the pre-payment penalty is limited to three months of interest,” said Minister Flaherty.
“The Government is proposing to modernize the Interest Act by broadening the list of business entities that can negotiate their own penalty. This will give all businesses an equal opportunity to get long-term financing.”
The Department of Finance invites all stakeholders to comment on these proposals. Comments should be received by October 15, 2010.