Mortgage penalty calculator
Breaking a $500,000 mortgage at 2.89% with three years left costs between $3,563.01 and $5,487.50 depending on your lender. Every lender charges the greater of three months' interest and the interest rate differential, but they compute both legs differently — the same mortgage costs 1.54× more at some banks than others.
The same mortgage, at every lender
Identical facts — $500,000 at 2.89%, 36 months left, a 1.5% discount when you signed. This is the comparison no other calculator shows.
| Lender | Penalty | vs cheapest | Governed by |
|---|
What happens if rates fall
Right now your rate sits below every comparison rate, so the differential is negative and three months' interest governs everywhere. That is not a permanent state. All six big banks subtract your original discount from the comparison rate, which is dormant today and severe in a falling market.
| If posted 3-year falls to | Big bank | Monoline | Multiple |
|---|---|---|---|
| 5.99% (today) | $3,612.50 | $3,612.50 | — |
| 4.49% | $3,612.50 | $3,612.50 | — |
| 3.49% | $13,500 | $3,612.50 | 3.74× |
| 2.49% | $28,500 | $6,000 | 4.75× |
What calculators get wrong here
- The discount deduction. All six big banks and Desjardins compare your contract rate against a posted rate with your original discount subtracted from it. A better negotiation means a bigger penalty — the opposite of what anyone expects. MCAP, First National and nesto don't do it.
- Two lenders inflate the three-month leg too. CIBC uses your contract rate plus your discount; National Bank uses the posted rate at origination. On identical facts that is about 54% more than every other lender.
- Variable means three months only. No lender we checked charges a differential on a closed variable mortgage. But CIBC computes those three months at prime rather than your rate, which is materially higher.
- The privilege lever is real and nobody mentions it. Exercising your annual lump sum immediately before discharge shrinks the balance the penalty is charged on — 10% at RBC, CIBC and National Bank, 20% at BMO and MCAP.
- Published estimates are ceilings. RBC states its own formula ignores present value and the declining balance, both of which reduce the real figure. Treat any number here, ours included, as an estimate and get a payout statement before deciding.
- A term longer than five years caps the charge. Under the Interest Act, an individual paying out after the fifth year of a term longer than five years owes three months' interest only, with no differential.
There is a way to pay no penalty at all
An assumption transfers your existing mortgage to the buyer instead of discharging it. No prepayment happens, so no penalty arises — and the buyer inherits your rate. For a seller facing a five-figure differential, that is the difference between moving and staying put.
See how an assumption works →Common questions
How much is the penalty to break a mortgage in Canada?
It is the greater of three months' interest and the interest rate differential. On a $500,000 balance at 2.89% with three years left, the charge ranges from $3,563.01 to $5,487.50 depending on your lender — a 1.54× spread on identical facts.
Why is my mortgage penalty so much higher than I expected?
Most likely the discount deduction. All six big banks compare your contract rate against a posted rate that has your ORIGINAL discount subtracted from it. The better a discount you negotiated, the bigger your penalty. Monoline lenders like MCAP and First National do not do this.
Do variable rate mortgages have a prepayment penalty?
Yes, but only three months' interest — there is no interest rate differential on a closed variable mortgage at any lender we checked. CIBC is the exception worth knowing: it computes that three months at prime rather than at your own rate.
How can I reduce my mortgage prepayment penalty?
Exercise your annual lump-sum prepayment privilege immediately before discharging. That shrinks the balance the penalty is charged on. The privilege ranges from 10% of the original principal at RBC, CIBC and National Bank to 20% at BMO and MCAP. Porting the mortgage to a new property avoids the charge entirely, and so does having a buyer assume it.
Does an assumed mortgage have a prepayment penalty?
No. An assumption transfers the existing mortgage to the buyer rather than discharging it, so no prepayment occurs and no penalty arises. For a seller facing a large interest rate differential, that is a direct saving.
Per-lender methods taken from each lender's own prepayment disclosure and standard charge terms, current 2026-08-06. Our arithmetic reproduces RBC's published worked example exactly. This is information, not advice — your lender's payout statement is the binding number.