Mortgage Penalty Calculator
Estimate the cost of breaking your mortgage early — 3 months' interest or Interest Rate Differential (IRD).
Mortgage Penalty Calculator
Estimate your cost to break your mortgage early
Posted rate from your lender for the remaining term
Estimated Penalty
$13,500
Method: IRD (higher)
3 Months' Interest
$5,062.50
IRD Amount
$13,500
Two Types of Mortgage Break Penalties
When you break a fixed-rate mortgage early, your lender charges the greater of: (1) 3 months' interest on the outstanding balance, or (2) the Interest Rate Differential (IRD). Variable-rate mortgages typically only charge 3 months' interest.
Interest Rate Differential (IRD) Explained
IRD is the difference between your mortgage rate and the current rate for the remaining term. For example, if you have 2 years left at 5% and current 2-year rates are 3.5%, the IRD is 1.5% × remaining balance × 2 years. The IRD penalty can be very large when rates drop significantly.
When Should You Break Your Mortgage?
Breaking your mortgage may make financial sense if: you can refinance at a rate low enough to recoup the penalty within 2–3 years, you're selling your home, you need to access equity, or your life circumstances have changed significantly.
Frequently Asked Questions
How much does it cost to break a mortgage in Canada?
Costs range from a few thousand dollars (3 months' interest on a variable) to $10,000–$30,000+ (IRD on a large fixed mortgage). Calculate your specific penalty before making a decision.
When does IRD apply?
IRD applies when breaking a closed fixed-rate mortgage and when the IRD calculation produces a higher penalty than 3 months' interest. This is common when current rates are lower than your contract rate.
Do variable rate mortgages have IRD?
No. Variable rate mortgages use the 3-month interest penalty method, making them cheaper to break than fixed mortgages.