Mortgage Penalty Calculator
IRD vs 3-month interest, tuned for Big 6, monoline, and variable lenders. Side-by-side comparison.
Your Mortgage
Inputs
This is an estimate
Every Canadian lender uses slightly different penalty formulas. Ask your lender for a written payout statement — that\'s the number you have to beat with a refi.
Estimated Penalty
$2,140
Higher of IRD or 3-month interest
As % of Balance
0.54%
≈ 3.0 months of interest
Both methods side-by-side
Which formula produces the bigger penalty?
IRD Penalty
$0
Balance × (contract rate − posted rate) × months ÷ 12. Standard for Big 6 fixed mortgages when rates have dropped since origination.
3-Month Interest
$2,140
Balance × (rate ÷ 12) × 3. Standard for variable mortgages and many monoline fixed mortgages regardless of rate direction.
What to do with this number
1. Ask your current lender for a written payout statement. That's the exact penalty they'll charge. Estimates from calculators are close but not perfect.
2. Use the Refinance Calculator to see whether the penalty pencils out vs the interest savings from a lower rate.
3. Consider blend-and-extend if you want to change terms without paying a penalty — your lender may offer it if you ask by name.
These numbers are a good estimate. A licensed IndiBrick advisor will tune them against your actual file and current lender rates.
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Personally reviewed by
Vikas Sharma
Broker · Part of Dream Home + Life
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Questions you probably have
What is the difference between IRD and 3-month interest?+
IRD (Interest Rate Differential) = balance × (contract rate − comparable posted rate) × months remaining ÷ 12. Used by Big 6 fixed mortgages. Grows when your rate is well below current posted rates. Can be $10,000+ on a typical file. 3-month interest = balance × (rate ÷ 12) × 3. Used by variable mortgages and many monolines. Typically $2,000–$5,000 on a typical file. Big 6 fixed mortgages charge the HIGHER of the two, which is almost always IRD.
Why is IRD so much bigger?+
The "comparable posted rate" input is what makes IRD explosive. Banks use their POSTED rate (published on the website — no borrower actually gets it), which is typically 200 bps above their DISCOUNTED rates. That 200-bps gap gets multiplied by your balance and remaining months. On a $400k balance with 24 months remaining and a 200-bps posted-vs-discount gap, that adds $16,000 to your penalty.
Which lenders use IRD vs 3-month interest?+
Fixed mortgages at Big 6 banks (RBC, TD, Scotia, BMO, CIBC, National): IRD, typically with posted rate. Monoline fixed (MCAP, First National, RMG, etc.): usually 3-month interest, sometimes IRD but with contract-vs-current rate rather than posted. Variable mortgages: almost always 3-month interest regardless of lender. Ask your lender for a written payout statement — it's the only accurate number.
Can I negotiate the penalty?+
Almost never. Penalty formulas are contractual. What you CAN negotiate: (1) a partial prepayment (up to 15–20% annually) to reduce the balance the penalty is calculated on, (2) blend-and-extend at your current lender (no penalty), (3) sometimes the retention team will waive a portion of the penalty if you're threatening to leave to a competitor.
When is it worth paying the penalty?+
When the interest saved over the remaining amortization exceeds the penalty. Use the Refinance Calculator — it computes the break-even month automatically. Rule of thumb: if break-even is before your remaining term ends, refinancing wins.
Real numbers, real broker.
The math above is a good estimate — a licensed IndiBrick advisor will tune it against your file and current lender rates.
Should you break? Get a broker reviewFSRA-licensed · Response within 2 business hours