Two-offer comparator
Which mortgage offer is cheaper?
The cheaper offer is the one with the lower expected cost: interest over the term, plus fees, minus cashback, plus the penalty you'd pay if you break it, times the chance you will. A lower rate with a posted-rate penalty can lose to a slightly higher rate with a fair one.
Your situation
Mortgage amount
Amortization (years)
Extra prepayment you plan each year
Chance you break it before the term ends: 30%
If you break it, when: year 2.5
Rates by then: -0.50 points
Most likely reason you'd break it
Falling rates raise IRD penalties; rising rates shrink them. Posted rates used for the posted-rate IRD: 5.49% (1-year), 6.05% (3-year), 6.19% (5-year), Bank of Canada, October 28, 2026.
Verdict at a 30% chance of breaking
Offer A is cheaper by about $2,604.
| Over the term | Offer A | Offer B |
|---|---|---|
| Monthly payment | $2,737 | $2,778 |
| Interest over the term | $102,391 | $105,982 |
| Balance at the end | $438,179 | $439,272 |
| Fees minus cashback | $0 | $0 |
| Three months' interest at the break | $5,167 | $5,350 |
| IRD at the break | $9,180 | $5,892 |
| Penalty if you break | $9,180 (IRD) | $5,892 (IRD) |
| Expected penalty (× 30%) | $2,754 | $1,768 |
| Expected cost | $105,145 | $107,749 |
Expected cost as the chance of breaking changes
| Chance of breaking | Offer A | Offer B | Cheaper |
|---|---|---|---|
| 0% | $102,391 | $105,982 | Offer A |
| 25% | $104,686 | $107,455 | Offer A |
| 50% | $106,981 | $108,928 | Offer A |
| 75% | $109,276 | $110,401 | Offer A |
| 100% | $111,571 | $111,874 | Offer A |
Educational estimate. Penalties follow FCAC's description (the higher of three months' interest or the IRD for closed fixed mortgages; usually three months' interest for variable). Your contract's own formula decides the real figure; ask each lender for it in writing.
How it's calculated
Expected cost, step by step
- Payments use Canadian compounding: semi-annual for fixed rates, monthly for variable.
- Interest is summed over the term, with your planned prepayment applied once a year up to each offer's lump-sum limit.
- At the break month, the penalty is three months' interest or the IRD, whichever is higher. The IRD is the balance × (your rate − the comparison rate) × years left. For the posted-rate method the comparison rate is the posted rate for the time left, plus your rate assumption, minus the discount you got.
- A portable offer pays no penalty if you break because you're moving and buying again.
- Expected cost = interest + fees − cashback + chance of breaking × penalty.
Not sure what your rate should be first? Grade it against today's best.
Questions people ask
Why can a lower rate cost more?
Because breaking a closed fixed mortgage costs the higher of three months' interest or the interest rate differential (IRD), and lenders that calculate the IRD with posted rates can charge several times more. If there's a real chance you'll sell, refinance or move during the term, the penalty can outweigh a small rate saving.
What is the 'posted-rate IRD' method?
Some lenders, often the big banks, work out the IRD using their posted rate for the remaining term minus the discount you got when you signed. Because posted rates are far above what borrowers pay, the comparison rate is low and the penalty is large. FCAC says lenders must tell you how they calculate it.
How likely am I to break my mortgage?
Only you can judge. Think about a move for work or family, a separation, a renovation you'd refinance for, or a sale. The slider lets you see where one offer stops being the better deal.
What does portability do?
A portable mortgage can be moved to a new home you buy, usually without a penalty on the amount moved. It only helps if you'd break because you're moving and buying again.