Mortgage prepayment penalty calculator
Most closed fixed mortgages charge the greater of three months’ interest or the interest-rate differential. Variables are usually three months’ interest. This is an estimate, not your lender’s payout statement. Posted-rate IRD at a big bank can be larger than the simplified figure.
Rules verified: 2026-07-13 · Methodology
| Balance | 3-month interest | IRD (standard) | Estimated penalty |
|---|---|---|---|
| $250,000 | $3,306 | $7,500 | $7,500 |
| $350,000 | $4,629 | $10,500 | $10,500 |
| $450,000 | $5,951 | $13,500 | $13,500 |
| $550,000 | $7,274 | $16,500 | $16,500 |
Closed fixed, 5.29% contract vs 4.29% comparison, 36 months left. Same engine as the form below.
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
IRD penalties can be shockingly high when rates have dropped. Ask your lender for an exact payoff quote before you break.
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
Rules verified: 2026-07-13 · Methodology
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.