Calculator CA3 · Renewal Shock. The Canadian Mortgage Handbook
What breaking your mortgage early would cost
Two formulas exist in Canada and only one of them produces frightening numbers. This works out three months' interest and the interest rate differential on the honest method, shows which one applies to you, and shows which is larger — because your lender charges the greater of the two.
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This calculator goes with Renewal Shock. The Canadian Mortgage Handbook by JP O'Connor. The book explains what the numbers mean and what to do next.
Any rate already filled in is as at September 2026 — Bank of Canada policy rate 2.25%, prime 4.45% at the six major banks, posted five-year 6.09%, best available five-year fixed about 4.24%. Rates move weekly and fixed rates move with the five-year Government of Canada bond yield, sometimes daily. Check yours before you rely on any of this.
🔒General information, not financial advice. This is math on the numbers you type. Nothing you enter is stored, saved or sent anywhere — there is no account and no cookie, and your numbers never leave this page. All figures are Canadian dollars (CAD). Check your own numbers with your lender or a licensed mortgage broker.
The basic split
A variable-rate mortgage costs three months' interest to break. That is the whole rule, and it does not change with the direction of rates. A fixed-rate mortgage costs the greater of three months' interest or the interest rate differential. The second formula is the one that produces the frightening numbers.
Three months' interest
Balance, times your annual rate, divided by four. On the book's worked household — $420,605 at 2.20% — that is about $2,313. Your lender's figure will differ slightly because of how it treats part months and any outstanding fees.
What the differential is actually for
It is meant to compensate the lender for interest it will not now receive. If you contracted to pay 5.99% for five years and leave after two, the lender has three years of expected income it has to replace by lending that money to someone else at whatever rates exist today. Conceptually: your rate, minus the lender's current rate for a term matching what is left, times your balance, times the years remaining.
The thing almost everybody gets backwards
Look at the formula. If your rate is lower than the current rate, the bracket is negative and there is nothing to compensate. The differential only bites when you signed high and rates have since fallen.
Which inverts the usual story. In September 2026 the pandemic-vintage borrower at 2.20%, the one this whole book has been worrying about, is cheap to break — a few thousand dollars. The borrower who signed a five-year fixed at around 6% in late 2023, who felt at the time like they had dodged something, is the trapped one: about $27,000 on a $500,000 balance with three years left. The renewal-shock cohort and the penalty-trapped cohort are different people.
You are entitled to the formula in writing
Federal cost-of-borrowing rules require lenders to disclose the components of the prepayment penalty formula and to explain how the penalty is calculated. FCAC also maintains Commissioner Guidance CG-9 on prepayment penalty disclosure. Ask for the formula, and ask for the penalty quotation in writing with the date it expires — quotations go stale, because the comparison rate moves.
Check this one. This is an estimate for orientation, not a quotation. Your lender calculates the penalty from your own contract, using its own comparison rate on the day, and it may add discharge and administration fees on top. Get the number in writing, with an expiry date, before you act on it. If you are selling, ask whether the mortgage is portable, because porting it to the new property can avoid the penalty altogether.
Get the full handbook
Canada · 170 pages · JP O'Connor
Renewal Shock.
The Canadian Mortgage Handbook
The rule that kept you with your lender changed in 2024. Nobody told you.
Uninsured straight switches no longer face the stress test (since November 21, 2024)
Why the posted rate you never paid drives your prepayment penalty
Your trigger rate: how to find it and what happens when you reach it
Prepayment room that's gone on the reset date if you don't use it
