Mortgage penalty calculator
Estimate what it would cost to break your fixed or variable mortgage before the term ends: three months’ interest, the interest rate differential (IRD), and which one your lender is likely to charge.
Free · No sign-up · Updated October 2026
$7,680estimated prepayment penalty
- Three months’ interest
- $5,290
- Comparison rate
- 4.65%
- Rate difference
- 0.64 points
- IRD estimate
- $7,680
- Penalty that applies
- IRD
Closed fixed mortgages usually charge the greater of three months’ interest and the IRD. Your lender’s figure can differ, so ask it for an exact quote.
Next step: compare mortgage rates
Lenders calculate penalties differently. See each lender’s penalty method in our reviews, for example RBC, TD and Tangerine.
How this calculator works
Three months’ interest
We multiply your balance by your interest rate and divide by four. This is the usual penalty for a closed variable-rate mortgage and the minimum for most closed fixed-rate mortgages, as the Financial Consumer Agency of Canada (FCAC) explains in its guidance on prepayment penalties.
Interest rate differential (IRD)
IRD = balance × (your rate minus the comparison rate) × months left ÷ 12. If the comparison rate is higher than yours, the IRD is zero. For a fixed-rate mortgage we show the greater of the IRD and three months’ interest, which is how most lenders’ penalty disclosures describe it.
Lenders pick the comparison rate in two main ways. Many big banks use their posted rate today for a term close to the time you have left, minus the discount you received off the posted rate when you signed. Many other lenders use their current rate for a comparable term with no discount adjustment. Choose the method your lender uses, which is in your mortgage contract.
Why your lender’s number can differ
This is a simple-interest estimate. Lenders may discount future interest to today’s value, account for your scheduled payments, round the remaining term to a posted term, add back cash-back incentives or charge administration and discharge fees. Some cap the penalty at three months’ interest after a set number of years.
Federal rules on mortgage prepayment information require banks and other federally regulated lenders to explain how they calculate prepayment penalties and to offer a penalty calculator. Ask for a written quote before you break your mortgage.
Frequently Asked Questions
How is a mortgage penalty calculated in Canada?
For a closed fixed-rate mortgage, most lenders charge the greater of three months’ interest and the interest rate differential (IRD). For a closed variable-rate mortgage, the penalty is usually three months’ interest. The exact method is in your mortgage contract and your lender’s penalty disclosure.
What is the penalty for breaking a mortgage?
On a $400,000 fixed mortgage at 5.29% with 36 months left, three months’ interest is about $5,290. If the lender’s comparison rate is 4.65% (a 6.25% posted rate minus a 1.60 point original discount), the IRD is about $7,680, so the IRD would apply. Use the calculator with your own numbers for an estimate.
What is the interest rate differential (IRD)?
It’s roughly the interest your lender loses if you leave early: the gap between your rate and a comparison rate, times your balance, for the time left in your term. It only applies when your rate is higher than the comparison rate, which is why it often bites when rates have fallen since you signed.
Why are big bank mortgage penalties so high?
Many big banks set the comparison rate as their posted rate for the remaining term minus the discount you got when you signed. Posted rates are usually well above the rates people actually pay, so a large original discount makes the comparison rate low and the IRD large. Lenders that use a comparable current rate instead often charge less.
How much is the penalty to break a variable mortgage?
Usually three months’ interest at your current rate. On a $400,000 balance at 4.15%, that’s about $4,150. Some lenders calculate it at a different rate set out in the contract, so check your terms.
Is there a penalty for paying off my mortgage at renewal?
No. At the end of your term you can pay off or move your mortgage without a prepayment penalty. Penalties apply when you break a closed mortgage before the term ends or prepay more than your prepayment privileges allow.
Can I avoid a mortgage penalty?
Options include using your annual prepayment privileges first, porting the mortgage to a new home, blending your rate with a new one, or waiting until closer to renewal. Each lender’s rules differ, so ask for a written quote before deciding.
Does breaking a mortgage early to get a lower rate make sense?
Compare the penalty plus any legal, appraisal or discharge fees with the interest you’d save over the rest of the term at the new rate. If the savings are smaller than the costs, staying put is usually cheaper. Our mortgage rate tables can help you see what rate you might get.
Where can I get my exact mortgage penalty?
Ask your lender for a penalty quote or use the calculator on its website. Federal rules on mortgage prepayment information require banks and other federally regulated lenders to explain how they calculate penalties and to provide an online calculator.
Results are estimates for general information, not financial advice. Confirm rates, fees and terms with your card issuer or bank. See our methodology.