Breaking a fixed-rate mortgage early triggers a penalty — and Canadian bank penalties can be shockingly high. This calculator computes both the 3-month interest method and the IRD (Interest Rate Differential) method and shows which one your lender will charge — it's always the higher of the two.
Estimate your penalty for breaking a fixed-rate mortgage early
You'll need four numbers from your mortgage documents: your current balance, your contract rate (the rate you're paying), your lender's posted rate at origination (the rate advertised publicly when you signed — usually 1–2% above your contracted rate), and the months remaining in your current term. Also enter your lender's current posted rate for the time remaining, and the new rate you'd get if you refinanced today.
If you're unsure of any of these numbers, call your lender — they're required to provide them.
The calculator shows both penalty methods side by side. The 3-Month Interest method is simply three months of interest on your outstanding balance at your contract rate. The IRD (Interest Rate Differential) method calculates the lender's lost revenue from the rate difference between your contract and the current market rate, multiplied by the time remaining.
Your lender charges the higher of the two — always. At Canada's big banks, the IRD penalty is notoriously large because they use posted rates (not discounted rates) in their calculation. A borrower who got a discount of 1.5% off the posted rate will see that discount used against them in the IRD calculation, resulting in a penalty sometimes 4–6x higher than at monoline lenders.
The Interest Saved field shows the interest savings from refinancing at the lower rate over the remaining term. If this exceeds the penalty, breaking the mortgage likely makes financial sense. If the penalty is larger than the savings, you're better off waiting.
The Interest Rate Differential penalty is the difference between your contract rate and the lender's current posted rate for the remaining term, multiplied by your balance and months remaining. Big banks use their posted rates (not discounted rates) which makes IRD penalties much larger than at monoline lenders.
Generally worth it if the new rate is at least 1–1.5% lower than your current rate, you have more than 2 years remaining, and the interest savings over the remaining term exceed the penalty. This calculator shows you the break-even analysis.
Yes. Variable-rate mortgages are almost always limited to 3 months' interest, regardless of the remaining term. This is a major advantage of variable rates that many Canadians overlook.
Yes — if you're moving, you may be able to port your mortgage to the new property, keeping your existing rate and avoiding the penalty. Rules vary by lender.
Explore current rates from 16+ Canadian lenders, or read our guides to understand your options.