Use the Mortgage Penalty Calculator to figure out whether it’s worthwhile to break your mortgage early by looking at the potential penalties you may incur
The Mortgage Penalty Calculator is meant to be a guide to help you understand the cost of breaking your mortgage contract prior to the end of the term.
It will provide a basis for how to calculate a mortgage penalty. However keep in mind that mortgage penalties tend to be complex and how the calculation is performed will vary across lenders. Most lenders will charge the greater of IRD (Interest Rate Differential) or 3 months interest penalties. The calculator below will explain these two types of potential penalties and summarize the type and magnitude of the penalty which will likely be applicable to your mortgage.
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Mortgage Penalities Summary
Must pay the greater of:
3 Months Interest
Interest Rate Differential
The mortgage penalty calculator is only meant to serve as a guide. Mortgage penalties are complex and tend to vary across lenders. The estimated penalty as given by the calculator will not necessarily reflect the actual penalty you will incur if you decide to break your mortgage early. While some lenders take into account the actual interest rate on your mortgage, others will only consider the posted rates when calculating the IRD penalty. Lenders will also vary when it comes to which comparative rate to use in the calculation of IRD. According to the interest rate act, lenders cannot charge IRD penalties on terms over 5 years, when you’re 5+ years into the mortgage contract (only 3 months interest penalty would apply). Finally, some mortgages cannot be prepaid ahead of maturity at all even though this tends to be rare. The variance across lenders in the way mortgage penalties are calculated makes it very important to check with your lender what the actual penalties would be prior to making the decision to break a mortgage before the end of its term.
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