The penalty depends on your mortgage type. For a variable-rate mortgage, the penalty is typically a flat three months’ interest, calculated on your current balance and rate.
For a fixed-rate mortgage, the penalty is the greater of three months’ interest or the Interest Rate Differential (IRD) — a calculation based on the difference between your original contract rate and the current rate a lender could charge for the time remaining on your term. IRD penalties can be substantially larger than three months’ interest, especially earlier in a term or in a falling-rate environment, and the way individual lenders calculate the IRD can vary meaningfully.
Before breaking any mortgage early, it’s worth getting an exact penalty quote from your current lender and having us run the numbers on whether breaking and switching actually saves you money once the penalty is factored in.