The respondent mortgagor renewed two residential mortgages for five-year terms.
During the renewal term, he attempted to prepay the principal and interest, relying on section 10(1) of the Interest Act, which allows prepayment after five years from the date of the mortgage.
The mortgagee refused the tender.
The Supreme Court of Canada held that while a mortgagor cannot contract out of the statutory right to prepay after five years, choosing to renew a mortgage for a further term of up to five years is a valid exercise of choice, not a waiver of the right.
The mortgagor was bound by the renewal agreements and could not prepay until the end of the renewal terms.
The appeal was allowed.
