Calculators For sellers
For sellers

Breaking your mortgage early?

If you sell or refinance before your term ends, your lender charges a penalty. For fixed mortgages it can be surprisingly large. This gives you an honest estimate of both methods so you know roughly what to expect, before you ask your lender for the exact number.

Your mortgage

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Current mortgage balance

Rate type

Fixed mortgages use the greater of two methods. Variable mortgages use the simpler three month interest penalty.

Your mortgage ratethe discounted rate you pay

The actual rate you pay on your current term. This drives the three month interest method.

Months remaining in your term

For example, 36 means three years left in your term.

Comparison ratetoday's rate for your remaining term

Roughly the rate your lender offers today for a term close to your remaining time. Your lender uses this to work out the interest rate differential.

Lender type

Big banks means the Big Six: RBC, TD, Scotiabank, BMO, CIBC, and National Bank. They usually calculate the differential using their higher posted rates, not the discounted rate you actually got, which inflates the penalty a lot. Credit unions and monoline lenders (for example MCAP, First National, or Manulife) usually use a simpler differential, so the penalty is often just the three month interest. This toggle changes the estimate a lot, which is exactly why a payout statement matters.

Posted rate when you got the mortgagenot your discounted rate

Big banks base the IRD on the higher posted rate from when you signed, not the discounted rate you actually pay. Entering your discounted rate here is the most common mistake and it understates the penalty. Find the posted rate on your mortgage commitment letter or signed agreement, which usually lists both the posted rate and your rate. If you only know your rate, a typical discount is about 1.5 to 2%.

Estimated penalty

an estimate, not your exact penalty

3 month interest

Rate differential (IRD)

This is an estimate. Lenders calculate the rate differential differently, and some use posted rates that add reinvestment fees, so your actual penalty can differ by 5 to 20% or more. The only way to know your exact penalty is a free, no obligation payout statement from your lender. Ask for one before you decide.

Ways to reduce a penalty You may be able to port your mortgage to a new home and keep your rate. If your renewal is close, waiting can save the penalty entirely. You can also use your annual prepayment privileges first to shrink the balance the penalty is based on. Jay can help you weigh these.

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Jay Patel

REALTOR® · GTA

Penalties trip up a lot of sellers. Before you commit, message me and I'll help you read your payout statement and look at ways to lower it.

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A quick, honest note. This is an educational estimate, not legal, financial, or tax advice, and not a quote. It uses Canadian semi annual compounding for the three month interest, and a simplified interest rate differential. Real lenders compute the differential in different ways, often using posted rates and extra fees, so your actual penalty can be materially higher or lower. The only accurate figure is a payout statement from your lender, which is free and does not commit you to anything. Jay is a REALTOR®, not a mortgage agent or lawyer, and is happy to connect you with a mortgage professional.