Breaking a $400,000 fixed mortgage at 5.20% with 30 months left would cost an estimated $11,000, or 2.75% of the balance. The same loan at a variable rate would cost $5,200. Put in your own balance, rate and months left and you get a figure for your mortgage.
How is a mortgage penalty worked out?
The calculator prices two things and shows you the bigger one. The first is three months of interest on what you owe. The second only applies to a fixed rate: the interest rate differential, or IRD. That takes your balance, multiplies it by the gap between your contract rate and a comparison rate, then by the years left in the term.
Variable mortgages skip the differential here, so the answer is three months of interest and nothing else. Lenders don’t all pick the comparison rate the same way, and your contract has the last word. So treat the result as a ballpark figure to plan around, then ask for a quote in writing.
What does the penalty look like in different cases?
Each row below starts from the default $400,000 balance and 5.20% contract rate, and moves one thing.
| Scenario | Three months of interest | Differential | Penalty |
|---|---|---|---|
| Fixed, comparison 4.10%, 30 months left | $5,200 | $11,000 | $11,000 |
| Fixed, comparison 4.10%, 12 months left | $5,200 | $4,400 | $5,200 |
| Fixed, comparison 5.00%, 30 months left | $5,200 | $2,000 | $5,200 |
| Variable, any months left | $5,200 | Not used | $5,200 |
Walking through the $11,000
You owe $400,000 at a fixed 5.20%, with 30 months to go. Three months of interest is $400,000 times 5.20% divided by 12, times 3, which comes to $5,200. Your lender quotes a comparison rate of 4.10%, a gap of 1.10 points. Run that against $400,000 for 2.5 years and the differential is $11,000. It’s the bigger number, so it’s the estimate.
Now shorten the wait. With 12 months left the differential shrinks to $4,400, and three months of interest takes over at $5,200. The time remaining matters as much as the rate gap. If you can hold on until the last year of a term, the bill can fall by half.
Where’s the tipping point? With a 1.10 point gap, the differential grows by about $367 for every month left in the term ($400,000 times 1.10% divided by 12). At that pace it passes the $5,200 floor at roughly 14 months. Any closer to the end than that, and the floor is your penalty.
Where do people go wrong?
Mostly on the comparison rate. It isn’t the rate in your renewal letter, and it isn’t the best rate you saw advertised. The field wants the figure for the time you have left, and only your lender can tell you what that is. Try a few values and watch how far the result moves, since the guess you make here is the biggest thing pushing the answer up or down.
The calculator also leaves out discharge fees, legal costs and any prepayment privileges that would cut what you owe first. The Financial Consumer Agency of Canada’s page on breaking your mortgage contract says to find out what penalty you’d pay, and how much, before you go ahead.
What should I do before I call the lender?
Have your mortgage balance, rate and renewal date in front of you, and ask for the penalty in writing along with the method used. Then ask what else comes with it, such as an admin fee or a discharge fee. Sam in Edmonton, ten months from the end of a term, might find that waiting costs little, while Kim in Barrie with two years to go is looking at the bigger differential.
Thinking of switching? Feed the penalty into the mortgage refinance calculator next to the savings from a new rate. If you’d rather pay the balance down without breaking anything, the mortgage prepayment calculator is the place to look. And if the term is nearly over, compare the result with the mortgage renewal calculator.
How we checked the figures
You supply the balance, the rates and the months. The formulas are the two methods above, and lenders’ own methods can differ, so read this page as a description of how the calculator works, not as law. This site has no connection with any government body, and what you see is an estimate.
About this calculator
- What it does
- Estimate the penalty to break a fixed or variable mortgage.
- Category
- Mortgage
- Last checked
- September 30, 2026
- Result type
- Estimate for information only, not tax advice.
Frequently asked questions
How does the calculator get its number?
It takes the higher of three months of interest and, on a fixed mortgage, the interest rate differential. A variable mortgage uses three months of interest only.
What's the comparison rate?
It's the rate your lender uses to price the time left in your term. Lenders set it their own way, so ask them for the number in writing.
Why is the penalty smaller with fewer months left?
The differential grows with the time remaining. In the default example, 12 months left instead of 30 takes it from $11,000 down to $5,200.
Are legal or discharge fees in the result?
No, only the penalty. Those other charges depend on your lender and your lawyer.
Can I count on the figure?
No. Your contract and your lender set the real amount, so use this to plan and then ask for a quote.
Sources and updates
Updated: . How we check rates · Editorial team · Updates