The Big Bank Mortgage Penalty Report
Breaking a five-year fixed mortgage three years early costs a typical $500,000 borrower about $15,000 at a Big 6 bank — and up to $30,000 on a $1M mortgage. That’s roughly 2.2× what a fair-penalty lender charges on the same balance, driven by a quiet bit of math the banks call posted-rate IRD.
Key findings
~$15,000 on a typical $500k mortgage
Breaking a 5-year fixed with three years left runs about $15,000 at a Big 6 bank — and up to $30,000 on a $1M mortgage.
2.2× a fair-penalty lender
That's roughly 2.2 times the ~$6,863 in three months' interest a variable-rate or fair-IRD lender would charge on the same balance.
All six banks use posted-rate IRD
TD, RBC, Scotiabank, BMO, CIBC and National Bank all compare your rate against an inflated posted rate (~6.8%) instead of the discounted rate you actually pay.
Largest early, smallest near renewal
Because IRD scales with the months remaining, the penalty is biggest early in the term and shrinks as you approach maturity.
The data: penalty by mortgage size
Estimated cost to break a 5-year fixed signed at 5.49% with 3 years remaining, as rates ease (see methodology). The penalty charged is the greater of the two.
| Mortgage balance | Big 6 posted-rate IRD | Three months’ interest | Penalty charged | vs fair penalty |
|---|---|---|---|---|
| $400,000 | $12,000 | $5,490 | $12,000 | 2.2× |
| $500,000 | $15,000 | $6,863 | $15,000 | 2.2× |
| $750,000 | $22,500 | $10,294 | $22,500 | 2.2× |
| $1,000,000 | $30,000 | $13,725 | $30,000 | 2.2× |
Source: Mortgage Squad Advisors analysis, 2026. Illustrative estimates — actual penalty per the lender’s written payout statement.
How the Big 6 inflate the penalty: posted-rate IRD
To break a fixed mortgage you pay the greater of three months’ interest or the Interest Rate Differential (IRD). Three months’ interest is simple and small. The IRD is where the Big 6 get expensive — and the lever is the comparison rate they choose. Instead of measuring your contract rate against the discounted rate a new borrower would actually get today, the Big 6 measure it against their posted rate — a sticker rate of around 6.8% that almost nobody pays. That inflated comparison widens the differential and multiplies the penalty.
The result, on our scenario: a fair, three-months’-interest penalty of about $6,863 on a $500k mortgage becomes a $15,000 posted-rate IRD — the bank charges the larger one. Monolines and many credit unions use fair IRD tied to their real discounted rates, which is why the same break can cost a fraction as much elsewhere. You can reproduce any figure here in our mortgage penalty calculator.
How each Big 6 bank calculates it
All six use posted-rate IRD on fixed mortgages. The representative posted rate each plugs into the comparison, and the wrinkles that matter when you switch:
TD Canada Trust
posted ~6.79%TD calculates fixed-rate penalties using its posted-rate IRD and registers most mortgages as a collateral charge, which can add a discharge step when you switch.
TD penalty calculatorRBC Royal Bank
posted ~6.84%RBC uses posted-rate IRD on fixed mortgages — your penalty is driven by the gap between your contract rate and RBC's posted rate for the remaining term.
RBC penalty calculatorScotiabank
posted ~6.84%Scotiabank applies posted-rate IRD on fixed terms; the eHOME/STEP readvanceable products are collateral-charged, which affects switching at maturity.
Scotia penalty calculatorBMO Bank of Montreal
posted ~6.79%BMO uses posted-rate IRD on closed fixed mortgages; its Smart Fixed and Homeowner ReadiLine products carry their own break and registration rules.
BMO penalty calculatorCIBC
posted ~6.84%CIBC calculates fixed-rate penalties with posted-rate IRD — the inflated posted-rate comparison is what pushes Big-6 penalties into five figures.
CIBC penalty calculatorNational Bank of Canada
posted ~6.79%National Bank applies posted-rate IRD on fixed mortgages; the All-in-One readvanceable product is collateral-charged and breaks differently.
National Bank penalty calculatorWhy this matters now
A large share of Canadian mortgages signed during the 2020–2023 cycle are renewing in 2025 and 2026, and many borrowers who locked in near the rate peak are tempted to break early and capture today’s lower rates. That collision — peak-rate contracts meeting falling rates — is exactly the condition that produces the biggest posted-rate IRD penalties. The penalty isn’t a reason not to act; it’s a number to put on one side of the scale. Breaking still wins when the interest you’ll save over the remaining term beats the penalty plus fees — but only if you know the real penalty first.
See whether breaking pays off with our refinance and blend-and-extend vs break analysis, and read why the charge differs so much by lender in monoline vs bank.
Every figure is computed from one transparent scenario using the same formulas as our public penalty calculator. Scenario: a five-year fixed mortgage signed at 5.49% (near the 2023 peak), broken with 36 months (3 years) remaining, as the lender’s comparison rate for the remaining term eases to 4.49%. Posted-rate IRD = balance × (contract rate − comparison rate) × (months remaining ÷ 12). Three months’ interest = balance × rate ÷ 4. The penalty charged is the greater of the two. Posted rates are representative current Big-6 5-year posted rates, not a live feed. These are illustrative estimates; the exact penalty on any real mortgage is set by the lender’s written payout statement on the discharge date. Analysis by Mortgage Squad Advisors (FSRA #13737), June 2026.
Journalists, editors and bloggers are welcome to cite this report. Please attribute it to Mortgage Squad Advisors with a link to this page. We’re happy to provide interviews, custom figures for a specific scenario, or a licensed mortgage broker to comment on the record.