Mortgage break penalty calculator
Estimate what breaking your mortgage would cost, compare it with staying, and see whether a lower rate may be worth exploring. Nothing you enter leaves your browser, there is no sign-up, and you can print or save any result to take to a broker.
What it does
Enter your current mortgage and the rate you have been offered. The calculator estimates your penalty using both common methods, works out the new payment, and compares the total cost of staying against breaking over the rest of your term.
Who it is for
Ontario homeowners partway through a term, wondering whether a lower rate is worth the penalty. It is also useful a year or two before renewal, when a penalty is smaller and the question is whether to act early or wait.
What it does not do
It does not know your lender’s exact formula or fees, and it does not recommend. It models a scenario from the numbers you give it. The only authoritative penalty is a payout statement from your lender.
Mode
Enter just the essentials. We'll fill in the rest.
Your current mortgage
Using a posted rate of 6.05% for the 3.0 years you have left, less a discount of 1.84 points worked out from your start date and rate. Posted rates are the big-bank average published by the Bank of Canada, 2026-10-28; your own bank’s may differ.
Minimum savings threshold
Only flag breaking as worthwhile if savings exceed this. Breaking involves legal fees and paperwork, so small savings may not be worth the effort.
Your break analysis
Technically yes — but below your savings threshold
Savings of $14,032 — below your $15,000 threshold
Breaking now would save about $14,032, which is less than the $15,000 you said would make it worth the effort. After legal fees and paperwork it may not be worth your time.
What to consider
Your payment drops by roughly $398 per payment.
Over the comparison window you pay $14,339 less, but owe $307 more at the end.
Estimated break penalty
IRD $9,291 vs 3-month interest $6,745 — IRD applied
IRD measured against 4.21%: posted rate less your original discount, the bank method
Measured the other way the IRD would be $14,798. Lenders differ, and only a payout statement settles it.
$9,291
If you stay
If you break
Balance detail at break date
Penalty uses the Canadian semi-annual compounding standard. Actual lender penalties vary by contract and only your lender can give you a real payout figure.
For informational purposes only — consult a licensed mortgage professional before deciding.
How the estimate works
The result is only as good as the method behind it, so here is the method.
The penalty
Two figures are worked out. Three months’ interest is your balance at your current rate for three months. The interest rate differential is the gap between your rate and today’s rate for a term matching what is left, applied to your balance for the months remaining. For a fixed-rate mortgage the standard method takes the greater of the two; for a variable-rate mortgage it is usually three months’ interest alone. Which “today’s rate” is used depends on your lender, which is why the calculator asks: a bank or credit union uses its posted rate less the discount you were given at signing, and other lenders use the rate they actually offer now.
The comparison
Staying means carrying on at your current rate and payment. Breaking means paying the penalty, then paying at the new rate on the remaining amortization, so the two paths are compared like for like. Both are totalled over the same window, which defaults to the end of your current term. The difference is the estimated saving, and it can be negative.
What is not included
Discharge and registration fees, legal and appraisal costs if you refinance with a new lender, the clawback of any cashback you received, and the loss of any prepayment privileges you were about to use. Each is usually hundreds rather than thousands of dollars, but they belong on the same page as the penalty, and a broker can put numbers on them.
Why your lender’s number will differ
Lenders pick the comparison rate for the IRD, and some use their posted rate rather than the discounted one, which makes the penalty larger. They also decide which term to compare against and count the exact days. That is why this is an estimate, and why the useful next step, if the scenario looks promising, is asking your lender for a payout statement.
Two terms, defined
Both appear on every payout statement. Neither is complicated once it is written down.
- Interest rate differential (IRD)
- The interest rate differential is a mortgage prepayment penalty equal to the difference between the borrower’s contract rate and the lender’s current rate for a term matching the time remaining, applied to the outstanding balance for that remaining time. Canadian fixed-rate mortgages typically charge the greater of the IRD and three months’ interest, so the IRD is the penalty that applies when rates have fallen since the mortgage was signed. Lenders differ on whether the comparison uses posted or discounted rates, which is the main reason two quotes for the same mortgage can differ by thousands of dollars.
- Three months’ interest
- Three months’ interest is a mortgage prepayment penalty equal to the interest the outstanding balance would accrue over three months at the mortgage’s current rate: balance multiplied by the annual rate, divided by twelve, multiplied by three. It is the usual penalty on Canadian variable-rate mortgages and the minimum penalty on most fixed-rate mortgages. On a $400,000 balance at 5%, it is about $5,000.
Definitions and method last reviewed 11 September 2026. They describe common Canadian practice; a specific lender’s contract governs.
Common questions
- How is a mortgage break penalty calculated in Canada?
- For most variable-rate mortgages the penalty is three months' interest on your balance. For most fixed-rate mortgages it is the greater of three months' interest and the interest rate differential (IRD). The exact method, and the rate a lender compares against, is set out in your mortgage contract, which is why estimates and lender figures can differ.
- What is the interest rate differential (IRD)?
- The IRD is the difference between the rate on your mortgage and the rate your lender could charge today for a term matching what is left on yours, applied to your balance for the time remaining. When rates have fallen since you signed, the gap is larger and so is the penalty. The calculator estimates it from the remaining-term rate you enter.
- Why is my lender's penalty different from this estimate?
- Lenders differ in which comparison rate they use, which term they compare against, how they count the days remaining, and what fees they add. Banks and most credit unions compare against their posted rate less the discount you were given at signing; other lenders compare against the rates they actually offer. The calculator asks which you are with and shows the figure both ways, using the average big-bank posted rates published by the Bank of Canada, so your own bank may differ. The only authoritative figure is a payout statement from your lender, and it is worth asking for one before deciding anything.
- Is it ever not worth breaking a mortgage?
- Often. When the penalty is larger than the interest saved over the comparison window, staying costs less, and the calculator says so. That is a useful result rather than a failure: the numbers can change as rates move and as your term gets shorter, so a scenario that does not work today may be worth revisiting later.
- Does anything I enter get stored or shared?
- No. The calculator runs entirely in your browser, and nothing you type is sent to us. If you choose to save a scenario for a rate alert, the mortgage figures are stored separately from your email address. A broker is only ever contacted if you specifically ask for that.
- Can I take this result to my broker or lender?
- Yes. Every result can be printed or saved as a PDF, and it is designed to be talked through rather than to be the final word. A broker can check whether the rate in your scenario is realistic, and your lender can tell you the actual penalty. These figures are estimates based on the information you entered.
Not worth breaking yet?
That does not mean the answer will stay the same. Rates move, and your penalty shrinks as your term gets shorter. MortgageSkip can keep watching your saved scenario and tell you when it reaches a threshold you choose.
You set the threshold, you get one email if it is reached, and nothing otherwise. A broker only ever contacts you if you specifically ask. How rate alerts work.