The two-formula choice
On a closed fixed mortgage, the lender charges whichever produces the larger amount: 3 months’ interest on your current balance, or the interest rate differential. When market rates have dropped since you signed your mortgage, IRD almost always wins (and it can be brutal — five-figure penalties are common). When rates have risen, the IRD is often $0 and 3MI applies.
Get the actual quote
Always call your lender for the formal payout penalty before making an offer to break the mortgage. Lenders can quote a 30-day-locked payout amount that reflects your specific contract terms, prepayment privileges already used, and whether your variable mortgage trigger has been hit. The estimator on this page is a directional ballpark, not a binding quote.
The renewal alternative
If you’re within 6 months of renewal, ask your lender for an early-renewal quote at today’s rates rather than breaking the mortgage. Most major Canadian banks will negotiate at 4 months out, sometimes earlier; saving the IRD penalty can offset a slightly less competitive rate.