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?
From our rate sheet (July 2026): insured variable from 3.60%, conventional variable from 3.74% — editable; fixed terms differ.
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.
Breaking looks worth it on these numbers — the rate savings outrun the penalty and fees by $9,400 over your remaining term. Worth confirming against your actual payout statement before acting.
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.
- CIBC & Simplii variables: 3 months' interest at prime (on the payout-statement date), not your discounted rate — use the toggle above to price it.
- Past year 5 of your term? The federal Interest Act caps the penalty at 3 months' interest for individual borrowers — IRD is barred (corporations are exempt from the cap). Banks' calculators rarely mention it.
- "Low-rate" / no-frills products (BMO Smart Fixed, MCAP ValueFlex, CMLS Rate Advantage and similar): bona-fide-sale-only clauses — you may be unable to refinance at all without selling, or face penalties around 3% of balance.
- Cash-back mortgages: break early and most lenders claw back some or all of the cash back on top of the penalty.
- Readvanceable combos: the HELOC portion is open — only the amortizing portion is penalized.
- Shrink it first: use your annual prepayment privilege immediately before breaking — the penalty is computed on the smaller balance. Some lenders also refund the penalty if you take your next mortgage with them within a set window (porting rules).
- 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
- Knows the traps: CIBC/Simplii variables charge 3 months at PRIME (not your rate), the Interest Act bars IRD past year 5 of a term, and low-rate no-frills products can lock you in until a bona fide sale
- 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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Case Studies — files like this
Anonymized case studies from our files. Names and identifying details removed.
- Case study · Residential / AlternativeBuying Out a Half Owner in Maple Ridge: An Alternative-Lender Refinance at 70% on Homestay and Suite IncomeBuying out a half owner on one fixed salary and non-taxable homestay income with no pay stubs: an alternative lender refinanced the Maple Ridge house at 70% in 2021, $1,050,000, grossing the homestay and child benefit up 25%.Read the file →
- Case study · Residential / AlternativeA Private Second Mortgage, a Car Loan and Family Debt: One Alternative-Lender Refinance at 77% in Maple RidgeA private second mortgage, a $73,000 car loan, family debt and cards on two incomes: an alternative lender refinanced the Maple Ridge townhouse at about 77% in 2025, $750,000 at just under 5%, and paid everything out into one payment.Read the file →
- Case study · Residential / PrimeA Mortgage and a Line of Credit in One Refinance: A Major Bank Lent 59% in Maple Ridge and Waived the AppraisalTwo salaries, ratios of about 48% and plans for updates. A major Canadian bank refinanced the Maple Ridge home at 59% in 2023, $550,000 at prime minus 0.75% plus a $100,000 line of credit, with the appraisal waived.Read the file →
How is a mortgage penalty calculated in Canada?+
Variable-rate mortgages: 3 months' interest (balance × rate ÷ 4) — at your contract rate at most lenders, though CIBC and Simplii use prime instead. 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.
See it on a real file: Blend and Extend Avoided a $50K+ Penalty →
Why is a CIBC variable penalty bigger than my rate suggests?+
CIBC and Simplii calculate the variable-rate prepayment charge as 3 months' interest at CIBC PRIME — using the prime rate on the day your payout statement is prepared — not at your discounted contract rate. If your rate is prime minus 1%, the penalty runs meaningfully higher than balance × your rate ÷ 4. Most other lenders use your contract rate.
I'm past year 5 of a 7- or 10-year term. Does IRD still apply?+
No. Section 10 of the federal Interest Act caps the prepayment charge at 3 months' interest once more than 5 years have elapsed since the mortgage date (for individual borrowers). IRD is barred in years 6+ — a rule bank calculators rarely surface. If a payout statement shows IRD past the 5-year mark, question it.
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 →
Every calculator here is built on published Canadian government rules and lender methodology, and was last checked for accuracy on October 18, 2026 — the arithmetic re-verified and every page re-read on screen. Rates and thresholds change — we confirm the current numbers for your file before you rely on them.