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Breaking a mortgage

What the penalty likely is, why banks charge double — and whether breaking is worth it at all.

✓ Verified math — proven against independent references and last checked September 1, 2026; the full proof is under "How this is figured," below the results.

Estimated prepayment penalty
$0
3 months' interest
IRD
BIG-BANK POSTED METHOD$0
MONOLINE FAIR METHOD$0

Interest saved by switching
Penalty + fees
Net result
Fine print that moves penalties
  • Past year 5 of the term? The Interest Act caps the penalty at 3 months' interest for individuals — banks' calculators rarely mention it.
  • "Low-rate" / no-frills products often carry bona-fide-sale-only clauses — the client may be unable to refinance without selling, or face ~3%-of-balance penalties.
  • Cash-back mortgages: breaking early usually claws back some or all of the cash.
  • Readvanceable combos: the line-of-credit portion is open — only the amortizing portion is penalized.
  • Shrink it first: using the annual prepayment privilege immediately before breaking reduces the balance the penalty is computed on.
How this is figured — assumptions & the printed proof

Why the same mortgage costs double to leave

What the prepayment penalty likely is, why the same mortgage can cost twice as much to leave at a big bank as at a fair-method lender — and whether breaking for today's rates is worth it at all. The payout statement is the only binding number; this page tells you what to expect before you request one.

The payout statement is the only binding number — this desk reads it with the client, prices the switch, and structures the exit or the blend. Quietly, and in coordination with you.

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Ramin Hallaji, Principal, licensed in British Columbia (BCFSA) and Alberta (RECA) — a private-client desk of Mortgage Guru Financial, Dominion Lending Centres Group · 778-879-6768 · ramin@privatewealthfinancing.ca · Legal & licensing · Privacy policy

Illustration only — not an offer of financing and not financial advice. IRD conventions vary by lender and the lender's payout statement always governs; rate fields are editable defaults, not live quotes. Interest-saved figures use simple interest on the current balance, which slightly overstates the benefit on an amortizing mortgage. The Interest Act cap applies to individual borrowers; corporations are exempt. Private Wealth Financing arranges mortgage financing only.