Calculate your mortgage break penalty in under a minute. No email required. No sales pitch. Just the number.
Enter your mortgage details
Your estimated break penalty
3-Month Interest
$0
3 months of interest at your contracted rate. The minimum any lender can charge.
Interest Rate Differential (IRD)
$0
The difference between your rate and today's comparable rate, for your remaining term.
Break Analysis
This is an estimate only. Your actual penalty will vary based on your lender's specific calculation method, prepayment privileges, and internal policies. The rates used in this calculator update monthly and may not reflect your lender's current posted rates. Always confirm directly with your lender before making any decisions.
Don't have a rate yet?A mortgage broker can get you a quote in minutes at no cost. Knowing your new rate is the only way to know if breaking actually makes sense.
Why is this so complicated? Because your bank designed it that way.
Canada is one of the only countries in the world where breaking a mortgage mid-term can cost you tens of thousands of dollars. The mechanism is called the Interest Rate Differential, or IRD. In theory it compensates the lender for lost interest revenue. In practice, at a big bank, it is calculated in a way that systematically inflates the penalty far beyond what it should be.
The Office of the Superintendent of Financial Institutions (OSFI) and the Financial Consumer Agency of Canada (FCAC) have reviewed these practices. The formulas are disclosed. They are technically legal. And they are, without question, designed to be opaque and punishing.
A mortgage broker or monoline lender calculates IRD using the current market rate for a term matching your remaining time. A big bank calculates it using the posted rate minus your original discount, then compares that against today's posted rate for your remaining term. That one difference can inflate your penalty by two to four times. It is not a mistake. It is a feature.
How the math works
Two methods. Two very different numbers.
Both methods start from the same idea: you agreed to pay a certain rate for a certain time, and if you leave early, the lender loses that interest. The disagreement is in what rate you are being compared against.
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Big Bank IRD Method
Takes the posted rate at the time you signed, subtracts your original discount, then compares that against today's posted rate for the term closest to your months remaining. The discount subtraction inflates the reference rate, which inflates the differential, which inflates your penalty.
Discount = Posted Rate at Sign - Your Actual Rate
Comparison Rate = Today's Posted Rate (matching term) - Discount
Differential = Your Rate - Comparison Rate
IRD = Balance x Differential x Years Remaining
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Broker / Monoline Method
Uses the actual current market rate for a term matching your remaining months. No posted rate trick. No discount manipulation. The differential reflects what the lender could actually earn by re-lending the money today.
Differential = Your Rate - Current Market Rate (matching term)
IRD = Balance x Differential x Years Remaining
Current Reference Rates
What rates is this calculator using today?
The IRD calculation depends on today's rates by remaining term. Big banks use Bank of Canada conventional posted rates. Broker lenders use current market rates. Updated monthly.
Remaining Term
BoC Posted Rate (Big Bank)
Market Rate (Broker / Monoline)
6 months or less
6.34%
4.35%
7 to 12 months
6.09%
4.44%
13 to 24 months
5.84%
4.24%
25 to 36 months
5.54%
4.14%
37 to 48 months
5.24%
4.09%
49 to 60 months
4.74%
4.04%
Source: Bank of Canada conventional mortgage rates and current market averages. Last updated April 2026.
Bank of Canada Data
The posted rate gap, over time.
Canadian banks set their own posted rates. Almost nobody actually pays the posted rate. The spread between posted and actual rates has historically been 1.5% to 2.5%. The wider the spread when you signed, the larger your IRD penalty if you leave early.
Year
BoC 5-Yr Posted Rate
Typical Actual Rate
Spread (Your Discount)
Source: Bank of Canada. Typical actual rates are estimates based on average discounted 5-year fixed rates in the market.
Common Questions
Everything Canadians ask about mortgage penalties.
The cost depends on your lender type and how long ago you signed. For big bank mortgages, penalties typically range from $3,000 to $30,000 or more on balances of $400,000 to $600,000. Broker and monoline lender penalties are usually significantly lower because they use a fairer IRD calculation. Your lender must charge whichever is greater: the 3-month interest penalty or the IRD.
It depends on the math. Calculate your penalty, then calculate how much you save monthly at the new rate. Multiply the monthly savings by the number of months remaining. If total savings exceed the penalty, breaking makes financial sense. Generally, if you can save 0.75% or more on a balance over $300,000 with 24 or more months remaining, the penalty often pays for itself within 18 to 24 months. Enter your new quoted rate in the calculator above to get a personalised answer.
Big banks start with the Bank of Canada conventional posted rate at the time you signed. They subtract your original discount to confirm your contracted rate, then compare your contracted rate against today's posted rate for a term matching your months remaining. The key issue is that your discount is baked into the calculation on both sides, which inflates the differential and therefore the penalty. This is why two borrowers with the same current rate can have very different penalties depending on when they signed.
The IRD formula is different. Broker and monoline lenders calculate IRD using the current market rate for your remaining term, which reflects what they could actually earn by lending the money to someone else today. Big banks use their posted rate minus your discount, which inflates the comparison rate and therefore the penalty. On the same mortgage, same balance, same remaining term, a broker lender penalty can be 50% to 75% lower than a big bank penalty.
A few ways. Most mortgages include prepayment privileges letting you pay down 10% to 20% of the original balance each year without penalty. Reducing the balance before breaking reduces what the penalty is calculated on. Some lenders allow you to port your mortgage to a new property, avoiding the penalty entirely. Open mortgages have no penalty at all, though they come with a higher rate. If you are buying a new home, ask your lender about porting before assuming you need to break.
The Bank of Canada publishes conventional mortgage rates, commonly called posted rates, that banks use in certain calculations. Almost nobody pays the posted rate. The real rate you get is the posted rate minus a discount negotiated when you signed. The problem is that when big banks calculate your IRD penalty, they use posted rate history rather than actual market rates. The bigger the discount you negotiated when you signed, the bigger the penalty if you leave early. Your good deal at signing can become a liability at renewal.
Canadian mortgage penalty rules are set by OSFI and interpreted by each lender. The posted rate IRD method used by big banks is legal, disclosed in your mortgage documents, and largely unchallenged by regulators. In the UK and Australia, penalties are typically much simpler and lower. The complexity of the Canadian system is not accidental. It makes it harder for borrowers to leave, protecting lender revenue at the expense of consumer flexibility.
The real question
Is it worth breaking your mortgage?
The penalty is only half the calculation. The other half is what you gain. Enter your new quoted rate in the calculator above and it will run the full break analysis for you automatically.
As a rough guide: if you can save 0.75% or more on a balance over $300,000 with 24 or more months remaining, the break often pays for itself within 18 to 24 months. Every situation is different. Run the numbers before you call your lender.
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