How is the penalty calculated if I break my mortgage early?
Updated: February 28, 2026CanadaFAQPrivate lending
Quick Summary
Penalties vary by lender and product. Variable-rate mortgages often use a simpler interest-based penalty, while fixed-rate mortgages may use a larger calculation (such as an interest rate differential).
Breaking a mortgage early can cost more than borrowers expect.
What usually drives the penalty
- Fixed vs variable rate.
- How much time is left in the term.
- The lender’s specific formula (and posted/discount rate rules).
Costs beyond the penalty
- Legal discharge and registration fees.
- Appraisal fees (if refinancing).
- New lender setup costs.
What to do before you commit (or before you break)
Ask for a written payout statement and a penalty estimate based on today’s date. If you are choosing between products, compare the penalty risk under a realistic scenario (selling or refinancing in 1–3 years).