It’s easy to get caught in the posted mortgage rate trap at the big banks.

No, you won’t have to pay the posted rate on your next mortgage. Pretty much nobody does that any more, according to mortgage broker Robert McLister. The real danger is that posted rates will be used to calculate the penalty if you ever have to break your mortgage, probably costing you thousands of extra dollars.

A mortgage penalty compensates a lender for the interest payments it loses out on when you break a mortgage contract. “That’s the intention,” said McLister, who is also editor of CanadianMortgageTrends.com. “But in many cases, it overcompensates. It’s punitive in many cases.”

As we head into another round of quarterly bank earnings reports, it’s worth thinking for a moment about how those wonderful profits and dividends for investors are generated. One way is by using posted instead of lower discounted rates when calculating how much to penalize a client breaking a mortgage.