Mortgage · Penalty
Mortgage penalty estimator.
Break a closed mortgage or exceed your prepayment privileges and FCAC says the charge is usually the higher of 3 months' interest or the interest rate differential (IRD). The gap between them can be tens of thousands of dollars.
Three months' interest is a small, predictable number. The IRD can be far larger when your rate has fallen well below the rate you originally locked in, because the bank is compensating itself for the interest it will lose by re-lending your balance at today's lower rate for the rest of your term.
Inputs
Estimated penalty
Fill the form and press Calculate.
Why lenders don't all calculate the IRD the same way
FCAC's own guidance is direct about this: "To calculate the IRD, your lender typically uses 2 interest rates. They calculate the entire interest fees left to pay on your current term for both rates. The difference between these amounts is the IRD." But which two rates a lender compares is genuinely their choice — some use the posted rate you signed at against your current discounted rate, others compare current posted rates on both sides. Because posted rates usually sit well above the real rate anyone pays, a posted-rate-based IRD can be several times larger than an intuitive rate-difference estimate.
That is exactly why this tool asks YOU to supply the comparison rate, rather than assuming one. Call your lender, ask which two rates they use, and test both here to see the real range you're facing before you commit to breaking the mortgage.
The three-month-interest floor
Even when your rate hasn't moved much, most closed mortgages still charge at least three months' interest on the balance you're prepaying. This tool always shows both figures and uses the higher one, matching FCAC's "greater of" rule.
Sources, read 25 September 2026: canada.ca / FCAC "Mortgage fees: Prepayment penalties" — the greater-of rule, the 3-month-interest description, the IRD description, and FCAC's own advice to review your mortgage contract and confirm the exact figure with your lender.
Frequently asked questions
Does a variable-rate mortgage have an IRD?
Usually not. Most variable-rate closed mortgages charge only three months' interest, since there's no fixed rate to compare against for the IRD calculation. It's fixed-rate closed mortgages where the IRD typically applies.
Can I avoid the penalty entirely?
Sometimes. Porting the mortgage to a new property, or blending your current rate with a new one instead of breaking the term outright, can reduce or eliminate the charge depending on your lender's policies. Ask before assuming you must pay the full penalty.
Why does a bigger rate drop increase my penalty?
The IRD compensates the lender for the interest income they lose by having to re-lend your balance at today's lower rate for whatever term remains. The larger the gap between your locked-in rate and today's rate, and the more time left on your term, the more income the lender is "owed" under this logic.
Is this the exact amount my bank will charge?
No — treat it as an estimate. FCAC itself tells consumers to check their mortgage contract and confirm the exact figure and methodology with their lender before relying on any number, including this one.
Estimate only — confirm with your lender
This tool implements the generic "greater of 3 months' interest or IRD" rule using a comparison rate you supply. Real lender methodology varies (posted vs. discounted rate comparisons, semi-annual vs. other compounding conventions, minimum penalty floors), and FCAC explicitly advises reviewing your mortgage contract and confirming the exact amount with your lender before acting on any figure here.