Mortgage Penalty Calculator
Calculate your mortgage penalty for breaking early.
🏠Mortgage Details
⏱️Term Details
📊IRD Calculation (Fixed Rate)
Your lender's current posted rate for a similar term
Big banks often use more punitive IRD formulas
💡 About Penalties
- • 3 Months Interest: Rate / 12 × outstanding balance × 3 (typical for variable)
- • IRD: Often applies to fixed rates
- • Big Banks: May use posted rate at origination (higher penalty)
- • Monolines: Often use fairer IRD calculations
- • Porting: May avoid penalty when buying new home
Estimated Penalty
$5,500
3 Months Interest
3 Months Interest
$5,500
Interest on your outstanding balance (rate / 12 × 3)
IRD Amount
$0
Interest Rate Differential
3 months' interest on your balance ($5,500) is higher than your IRD ($0).
⚠️ Important Notes
- • This is an estimate. Contact your lender for exact penalty amount.
- • Some lenders use different IRD calculation methods.
- • Prepayment privileges may reduce your penalty.
- • Porting your mortgage to a new property may avoid penalties.
Mortgage Negotiation Guide
Negotiating your rate could save thousands, depending on your mortgage.
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Frequently Asked Questions
How is mortgage penalty calculated in Canada?
Canadian lenders calculate penalties using one of two methods: 3 months' interest or the Interest Rate Differential (IRD). You pay whichever is HIGHER. The IRD is the difference between your current rate and the rate the lender could charge today for the remaining term, multiplied by your balance and remaining term. Fixed-rate mortgages typically use IRD; variable-rate usually uses 3 months' interest.
What's the difference between 3 months interest and IRD?
3 months' interest is interest on your outstanding balance for three months: (annual rate ÷ 12) × balance × 3. It is not 3 × your blended monthly payment, which also includes principal. IRD (Interest Rate Differential) is the difference between your contract rate and the lender's current comparable rate for your remaining term, multiplied by your mortgage balance and remaining time. Lenders charge the greater of the two. IRD penalties are often much higher than 3 months' interest when rates have fallen.
Can I avoid paying a mortgage penalty?
Yes, in some situations: port your mortgage to a new property (same lender), blend and extend your rate, wait until your renewal date, or use prepayment privileges to reduce your balance before calculating the penalty. Some lenders also offer 'portable' mortgages that move with you. Always ask your lender about penalty-reduction options.
Is it worth breaking my mortgage early?
It depends on your savings versus the penalty. Generally, if you can save more in interest over the remaining term than the penalty costs, it's worth it. For example, if your penalty is $5,000 but you'll save $8,000 in interest by switching to a lower rate, you come out ahead. Use our calculator to compare your exact numbers.
Do all lenders charge the same penalties?
No, penalty calculations vary significantly between lenders. Some credit unions and monoline lenders use more favorable IRD formulas than big banks. Big banks often use 'posted rate' IRD calculations that result in much higher penalties. Always ask your lender for the exact penalty formula before signing. This can save you thousands if you need to break early.