For homeowners

    Mortgage Penalty Calculator

    Estimate the cost of breaking your mortgage early. The calculator compares three months' interest against the Interest Rate Differential and shows which one your lender would charge.

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    Enter your mortgage balance to estimate the penalty.

    Estimate only. The IRD here uses the standard posted-rate method (balance × rate difference × months remaining ÷ 12). Big banks often use a discounted-rate variation that produces a larger penalty, and some lenders cap or compound differently. Always get the exact figure from your lender in writing before you break your mortgage.

    Three months' interest versus the IRD

    Break a fixed-rate mortgage early and you pay the greater of two amounts. Three months' interest is simple: your balance times your monthly rate, times three. The Interest Rate Differential recovers the interest the lender expected to earn over the rest of your term, and on a long remaining term at a high rate it is usually the bigger of the two. Variable-rate mortgages are simpler — the penalty is just three months' interest.

    Why the bank's number is often higher

    The standard IRD compares your rate to the lender's current rate for a comparable term. The Big Five banks instead compare your rate to their posted rate minus the discount you originally received, which inflates the gap and the penalty. This tool uses the standard method, so treat its IRD as a floor and confirm the exact figure with your lender before you act.

    Before you break your mortgage

    Sometimes the penalty is worth paying — to refinance at a much lower rate, consolidate debt, or sell. Run the numbers, then keep the paperwork. A durable record of your mortgage history, rates, and renewal dates is the cheapest insurance a homeowner has, and it is what Habyn property records are built to keep, free for homeowners on the Home plan.

    Frequently asked questions

    How is a mortgage penalty calculated in Canada?

    For a fixed-rate mortgage, the penalty is the greater of three months' interest or the Interest Rate Differential (IRD). For a variable-rate mortgage, it is three months' interest only. The IRD is usually the larger of the two for fixed mortgages.

    What is the Interest Rate Differential (IRD)?

    The IRD compensates the lender for the interest they lose when you break your contract early. The standard method is your balance times the gap between your rate and the lender's current rate for the remaining term, times the fraction of a year left. Big banks often use posted rates, which inflates the penalty.

    Why is my bank's penalty higher than this estimate?

    The Big Five banks typically calculate the IRD against their posted rates minus your original discount, not their current discounted rates. That posted-rate method produces a substantially larger penalty than the standard calculation this tool uses. Always get the exact figure from your lender.

    Can I avoid a prepayment penalty?

    Often partly. Most mortgages allow lump-sum prepayments of 10% to 20% a year penalty-free, and porting your mortgage to a new home or waiting until renewal avoids the penalty entirely. Ask your lender about your prepayment privileges.

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