Canadian mortgage penalty calculator

How it works

1. Enter your mortgage details: balance, contract rate, months left, and the lender’s comparison rate for the IRD.
2. We estimate both penalties: three months’ interest and the interest rate differential; fixed-rate mortgages use the greater of the two.
3. Compare the refinance: we total the interest you’d save at a new rate over your remaining term, subtract the penalty and switching costs, and show the break-even month.

Penalty methods at a glance

Frequently asked questions

Why a Big 6 bank quote may differ from a monoline lender

Big 6 banks typically calculate the IRD using their posted rates — and the gap between posted and discounted rates can make the comparison rate much lower than the rate you are actually paying. A lower comparison rate widens the spread between your contract rate and the lender’s rate, which can push the IRD penalty well above three months’ interest.

Many monoline lenders instead use a discounted or actual-lending-rate comparison, which usually produces a smaller IRD. That is why two lenders can quote very different penalties on the same balance, rate, and time remaining: the contract method matters as much as the numbers.

Before paying the penalty

• Get a written payout statement from your current lender with the exact penalty, comparison rate, and effective date.
• Use any available lump-sum prepayment privilege before breaking, if your contract allows it — a lower balance means a lower penalty.
• Ask whether porting your mortgage to a new property (or blending the rate) avoids the penalty entirely.
• Price the full switch: legal fees, appraisal, discharge fees, and any cash-back you must repay.
• Time the break: penalties shrink as the term end approaches, so a quote today may not match a quote next month.

How this refinance comparison is calculated

The calculator estimates three months’ interest as 3/12 of a year’s interest on your current balance at your contract rate. The IRD is estimated as the gap between your contract rate and the lender’s comparison rate, multiplied by your balance and the years remaining. For fixed-rate mortgages, the estimated penalty is the greater of the two; for variable-rate mortgages, it is three months’ interest.

The refinance comparison then amortizes your balance at both your contract rate and the new rate over your remaining term, using semi-annual compounding as Canadian mortgages do. The difference in interest paid is your gross savings; subtracting the penalty and your switching costs gives the net benefit, and the calculator finds the first month where cumulative savings cover those costs.

Sources: Financial Consumer Agency of Canada (canada.ca) and Manulife Bank prepayment guidance (manulifebank.ca).