Prepayment Penalty Calculator
Find out what it costs to break your mortgage early — Morty decodes the IRD formula so you don't have to.
Your Mortgage Details
Uses the comparison rate you enter directly in the IRD formula (common with monoline lenders).
Comparison / market rate for a term matching your remaining months
Estimated Prepayment Penalty
$10,500
3.00% of your outstanding balance · Interest Rate Differential · Standard IRD
$4,629
Lower option
$10,500
Applied (higher)
1.00%
5.29% − 4.29%
3.0 yrs
36 months
Morty warns: IRD penalties can be shockingly high when rates have dropped. If you're considering breaking your mortgage, ask your lender for an exact payoff quote first.
Three months' interest
Balance × Contract rate × 3/12$350,000 × 5.29% × 0.25
= $4,629
Interest Rate Differential (standard / monoline)
Balance × (Contract − Comparison) × Remaining years$350,000 × 1.00% × 3.00
= $10,500
Applied penalty
Greater of the two = $10,500 (IRD)Big banks often compute IRD with posted-rate methods that can produce a larger number than monoline estimates. Always request a formal payout statement. Breaking may also interact with collateral charge registration — see our renewal / refinance checklists and glossary.
- Fixed-rate penalty = greater of three months' interest or IRD
- Variable-rate penalty = three months' interest only
- Standard IRD uses the comparison rate you enter as-is (monoline-style)
- Posted-rate IRD: effective comparison = current posted − discount received (common Big-5 simplification)
- Does not model blend-and-extend, partial prepayment privileges, or full lender-specific IRD schedules
Frequently asked questions
- How is a Canadian mortgage prepayment penalty calculated?
- For most fixed-rate mortgages, the penalty is the greater of three months’ interest or the Interest Rate Differential (IRD). Variable-rate mortgages usually use only three months’ interest. Your lender’s fine print and charge type (standard vs collateral) matter.
- What is IRD?
- Interest Rate Differential estimates the interest the lender loses if you break early: outstanding balance × (your contract rate − a comparison rate) × remaining term in years. Big banks often use a posted-rate method that can produce a larger number than this simplified estimate.
- Is this calculator exact for my bank?
- It is an educational estimate using the common simplified IRD formula. Always request a formal payout statement from your lender before breaking or refinancing — penalties can differ substantially by institution.