What breaking your mortgage actually costs.
Two lenders can charge wildly different penalties on the identical mortgage — because they don't calculate IRD the same way. This calculator models both Canadian methods, shows the arithmetic in plain sight, and answers the only question that matters: break, stay, or blend?
Your mortgage
How your lender calculates IRD
On your approval documents. Big-bank posted rates typically ran 1.5–2%+ above the rate you actually got — that "discount" is exactly what inflates the penalty later. Your discount: 1.60%.
Editable default — check your lender's posted rate for the term closest to your remaining 26 months.
Is breaking worth it?
Discharge fees typically run $75–$400 depending on lender and province; a switch often comes with lender-paid legals and appraisal.
Comparison rate used: 6.09% posted − 1.60% original discount = 4.49%, against your 5.89% for 26 months.
The posted-rate method makes this penalty $9,100 larger than a fair-method lender would charge on the identical mortgage. That gap is why we read the penalty clause before choosing the lender — not at breakup time.
Staying (or blending) likely wins. The penalty eats the savings on these numbers. Ask about a blend-and-extend — and diarize 120 days before renewal — that's when we can lock a switch that funds penalty-free on your maturity date.
Savings use simple interest on your current balance, which slightly overstates the benefit on an amortizing mortgage. Your lender's payout statement is the only binding penalty number — we'll read it with you, free.
- Models BOTH Canadian IRD conventions — the big-bank posted-rate method (posted minus your original discount) and the monoline fair method — and shows the dollar gap between them on your exact mortgage
- Names the camps: RBC, TD, BMO, CIBC, Scotiabank and National Bank use posted-rate IRD; most monolines and credit unions compare against real current rates
- Shows the comparison-rate arithmetic in plain sight — posted rate, your original discount, and the term-rounding — instead of a mystery number
- Finishes the job: break vs stay vs blend-and-extend verdict against the rate you can actually get today, fees included
Get your real mortgage approval amount
Calculators give estimates. We give exact numbers — based on your income, credit, and the lender most likely to say yes. Free, no obligation, same-day reply.
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How is a mortgage penalty calculated in Canada?+
Variable-rate mortgages: 3 months' interest at your contract rate (balance × rate ÷ 4) at almost every lender. Fixed-rate mortgages: the GREATER of 3 months' interest or the Interest Rate Differential (IRD) — your rate versus a comparison rate, times the balance, times the time remaining. Which comparison rate the lender uses is where penalties diverge wildly.
Why are big-bank penalties so much larger than monoline penalties?+
Big banks (RBC, TD, BMO, CIBC, Scotiabank, National Bank) compute IRD against their POSTED rate minus the discount you originally negotiated. Because discounts often run 1.5–2%+, the comparison rate collapses and the IRD balloons — routinely 2–4× what a monoline (First National, MCAP, RMG and most credit unions) would charge on the identical mortgage, since monolines compare against their real current rates.
Can I reduce or avoid the penalty?+
Often, yes. Use your annual prepayment privilege (typically 10–20% lump sum) right before breaking — the penalty is calculated on the balance after the lump. Ask about blend-and-extend, which trades the cash penalty for a blended rate. Port the mortgage to your next home. Or diarize 120 days before maturity — we can arrange a switch that funds penalty-free the day your term ends.
Is it ever worth paying a five-figure penalty?+
When the interest savings over your remaining term beat the penalty plus fees, yes — the calculator runs that exact comparison. It can also make sense when the break unlocks something bigger than rate: consolidating expensive debt, pulling equity for an investment, or escaping a lender that won't advance more funds. The payout statement, not the estimate, makes the final call.
Related tools: Pay off faster (prepayment privileges) → · Payment & compounding calculator → · Blended rate & consolidation →