Prepayment Penalty
Mortgage prepayment penalty estimator.
Most fixed mortgages charge the GREATER of three months' interest or the Interest Rate Differential (IRD). Variable mortgages typically charge three months' interest only.
Live math · no calculate button| Canadian semi-annual compounding · OSFI B-20| Ontario + Toronto LTT-aware| Same engine our advisors use
Your inputs
Estimated penalty (greater of)
$9,450
Verify with your lender — methods vary
3 months' interest$6,176
IRD (interest-rate differential)$9,450
Take it with you
Download a neat PDF report with your numbers.
Lender-ready summary, your assumptions baked in, and a personalized note from a advisor at Mortgage Squad Advisors.
Methodology · Canadian-correct
Lenders use different IRD methods (posted-rate, contract-rate, discounted-rate). The number above is an approximation. Always request a written payout statement from your lender before deciding.
Mortgage glossary— terms that matter for this calculator
How is the prepayment penalty calculated in Canada?
Fixed mortgages: the <strong>greater of</strong> 3 months' interest <strong>or</strong> the Interest Rate Differential (IRD). Variable mortgages: typically 3 months' interest only. This calculator models both methods so you can see which one your lender will apply.
Why do Big-6 banks charge such large IRD penalties?
Big-6 banks (RBC, TD, Scotia, BMO, CIBC) use <strong>posted-rate IRD</strong> — the spread between the artificial posted rate (~6.79%) and today's discounted rate for the remaining term. Monolines (MCAP, First National, RFA) use <strong>fair IRD</strong> — your contract rate vs today's rate. Same balance can produce a $14K penalty at a Big-6 vs $4K at a monoline.
How can I avoid a prepayment penalty entirely?
Three options: (1) wait until renewal (no penalty at maturity), (2) port your mortgage to the new property if you're moving (most A-lenders allow this), or (3) blend-and-extend with your current lender instead of breaking — the lender blends your existing rate with today's rate at no penalty.
What's the lender's exact calculation method?
Every lender publishes the formula in your mortgage commitment. Big-6 banks all use posted-rate IRD. Monolines use a mix. Some specialty lenders charge only 3 months' interest (no IRD). Before signing a new mortgage, ask the broker for the IRD method in writing.
Can I prepay without penalty?
Yes — most Canadian mortgages allow annual prepayment privileges (typically 15-20% of original principal per year) WITHOUT penalty. Plus you can increase your regular payment by 10-15% per year penalty-free. The penalty only applies if you fully break or substantially prepay beyond these limits.