Mortgage Penalty Calculator
Thinking about breaking your mortgage to refinance, sell, or move? Estimate the penalty before you decide. We show both the 3-months'-interest charge and the Interest Rate Differential, so you can see which one your lender will use.
Time remaining until your term ends
Your lender's rate for a term matching your time left. Banks often use their higher posted rate, which inflates the penalty.
Estimated penalty to break early
$10,430
charged as the Interest Rate Differential
3 months' interest
$3,929
Interest rate differential
$10,430
IRD
On a fixed mortgage you pay the greater of the two. The IRD can swing a lot based on which comparison rate your lender uses — always get the exact figure in writing before you break.
The two ways a penalty is calculated
Breaking a mortgage before the term ends triggers a prepayment penalty. For a variable-rate mortgage it is almost always three months of interest, which is relatively small. For a fixed-rate mortgage you pay the greater of three months of interest or the Interest Rate Differential — and the IRD is usually the larger, sometimes dramatically so.
The comparison rate is everything
The IRD hinges on which comparison rate your lender plugs in. Monoline lenders tend to use their actual discounted rates, keeping penalties reasonable. The big banks often use their much higher posted rate, which inflates the gap and the penalty. This is why the same mortgage can cost a few thousand dollars to break at one lender and ten thousand or more at another. Try changing the comparison rate above to see the effect.
Before you break
Always confirm the exact penalty with your lender in writing — they are bound by their own contract wording, and this tool gives a planning estimate, not the final number. Then weigh the penalty against what you would save at a new rate, or whether porting the mortgage to your next home avoids the penalty entirely.
Frequently asked questions
How much is the penalty to break my mortgage?+
On a variable mortgage it is almost always three months' interest. On a fixed mortgage it is the greater of three months' interest or the Interest Rate Differential (IRD). For example, a $350,000 balance at 4.49% with 24 months left and a 3.0% comparison rate gives about $3,929 in three months' interest but roughly $10,430 in IRD — so the penalty would be about $10,430.
What is the Interest Rate Differential (IRD)?+
The IRD is the lender's estimate of the interest they lose when you break a fixed mortgage early. It is roughly your balance times the difference between your rate and a comparison rate, times the years remaining. The comparison rate is the key variable — and where penalties get expensive.
Why are big-bank penalties so much higher?+
Major banks typically calculate the IRD using their posted rate — an inflated rate almost no one actually pays — as the comparison rate. That widens the gap and can multiply the penalty versus a lender that uses its real discounted rates. Two mortgages with the same balance and rate can have wildly different penalties depending on the lender's method.
Is it ever worth paying the penalty?+
Sometimes. If today's rates are far below yours, the interest you save over the remaining term can exceed the penalty, especially on a variable mortgage with the cheaper three-month penalty. Run the penalty here, then compare it to the interest you'd save at a new rate before deciding.
How can I avoid or reduce the penalty?+
Options include porting your mortgage to a new property, using your annual prepayment privileges to pay down the balance first, waiting until closer to renewal when the IRD shrinks, or choosing a variable rate up front if you expect to move. Always get the exact penalty from your lender in writing — calculators give an estimate, not the binding figure.
More hômm calculators
Breaking to buy your next place?
If you're breaking your mortgage to move, the penalty is only half the math. A hômm REALTOR® can help you weigh it against your next home in Alberta.
Estimates are for general information only and are not financial advice or a mortgage approval. Rates, premiums, and rules were last reviewed 2026-06-01. Confirm exact figures with your lender, lawyer, and a hômm REALTOR®.