Calculator
Prepayment penalty estimator
Breaking a closed mortgage early usually costs the higher of three months' interest or an interest rate differential (IRD). This estimator shows both so you know roughly what to expect before you ask your lender for the exact figure.
Three months' interest
$3,000
Simplified IRD
$12,000
Estimated penalty
$12,000
higher of the two
FCAC's illustration uses $200,000 at 6% with 36 months left and a 4% comparison rate: three months' interest $3,000, IRD $12,000, so the penalty is $12,000. Your lender must tell you how it calculates your penalty — get the exact figure in writing.
Simplified IRD = balance × (contract rate − comparison rate) × years remaining. Lenders' methods differ (some add discounts back, some use different comparison terms). This is an estimate, not a payout statement.
How it works
- Three months' interest = balance × contract rate × 3/12.
- Simplified IRD = balance × (contract rate − comparison rate) × years left in the term.
- Fixed mortgages: the estimate is the higher of the two. Variable: usually three months' interest.
Questions people ask
Which comparison rate does my lender use?
It varies. Many lenders use the posted rate for the remaining term minus any discount you received. Your lender must tell you how it calculates the penalty.
Can I avoid the penalty?
Options include waiting for maturity, using prepayment privileges, porting the mortgage, or a blend-and-extend. Each has trade-offs.
Is this the amount I will pay?
No. It is an estimate. Ask your lender for a written payout statement.