Breaking a closed mortgage early usually means a penalty — and lenders charge whichever of two figures is higher: three months' interest, or the interest rate differential (IRD). Enter your mortgage details below for a rough estimate before you get your lender's own number.
Enter your balance, contract rate, months left in the term and your lender's current rate. The estimate updates instantly — no email required.
Your lender's own payout statement is what actually governs. See how a discharge and payout works →.
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Your lender charges whichever is higher.
Three months' interest is straightforward: roughly a quarter of a year's interest on your current balance at your contract rate. The interest rate differential (IRD) instead compares your contract rate against what the lender is charging today for a similar remaining term — the gap, applied to your balance over the months left, is meant to make the lender whole for the rate you agreed to pay but won't anymore.
IRD generally applies only to fixed-rate mortgages, and under section 10 of the federal Interest Act, an individual with a mortgage more than five years old can pay it out on three months' interest alone, regardless of what the contract otherwise provides — the differential stops applying once you pass that five-year mark. Variable-rate closed mortgages almost always carry a much simpler three-months'-interest penalty.
Most closed mortgages let you pay down a portion penalty-free each year.
Most closed mortgages come with an annual prepayment privilege — commonly 10% to 20% of the original principal — that you can put toward the balance with no penalty at all. Using that privilege first, right before you break the mortgage, shrinks the balance the penalty is calculated on, which can meaningfully lower the final number.
The exact privilege percentage and whether it resets annually or can be carried forward is set out in your mortgage commitment or annual statement — check it before assuming a figure. Enter your own privilege percentage in the calculator above to see the effect.
Run your own number — any balance, rate, term or privilege — in the calculator above; it uses the exact same math.
Generally no. Closed variable-rate mortgages almost always carry a simple three-months'-interest penalty rather than an IRD, though it's worth checking your specific mortgage commitment to confirm.
Under section 10 of the federal Interest Act, an individual can pay out a mortgage more than five years old on three months' interest alone, whatever the contract says — so the interest rate differential no longer applies once you pass that mark.
It should be close, but lenders calculate the differential their own way — some use the posted rate less your original discount rather than your actual contract rate, which can produce a higher number. Always get your lender's written payout statement before relying on a figure.
Sometimes. Porting your existing rate to a new property, or using your unused prepayment privilege before breaking the mortgage, can reduce or eliminate the penalty depending on your lender's rules. See our Mortgage Centre for how porting and switching work.
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Book a 20-minute call with a real estate lawyer — $150, HST included, credited in full toward your file once payment is received.
This is a 20-minute call. We cover as much as we can and stop at twenty minutes. If more is needed, we will say what the next step is and what it would cost.
“My quote at the start matched what I actually paid at closing, no surprises.”
C.T. · Home purchase · Windsor
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Read more reviews →These are estimates for planning. They are not legal advice and they do not create a solicitor-client relationship. Last reviewed 23 September 2026.