Posted-rate penalty check: what your lender's posted rates do to an IRD
Most big banks work out the penalty for breaking a fixed mortgage with posted rates: today's posted rate for the time left minus the discount you got at signing. This check uses each lender's posted rates as we collected them and the Bank of Canada posted rate for the month you signed.
For a full penalty estimate by lender and method, use BankMortgages.ca's mortgage penalty calculator.
Posted-rate penalty check
Three months' interest vs the interest rate differential (IRD), using the lender's own posted rates collected Nov 2, 2026 and the Bank of Canada posted rate for the month you signed.
- Three months' interest
- $4,790
- IRD
- $4,000
- comparison 4.29%
- Interest saved by switching
- $2,400
- at 4.49%
- Net of the penalty
- −$2,390
Estimate, not advice. An estimate. Your lender's payout statement is the only exact figure.
Estimated penalty $4,790 (three months' interest); 24 months left.
| Months left ↓ / Rates move → | −1.00 | −0.50 | today | +0.50 | +1.00 |
|---|---|---|---|---|---|
| 6 mo | $4,790 | $4,790 | $4,790 | $4,790 | $4,790 |
| 12 mo | $6,000 | $4,790 | $4,790 | $4,790 | $4,790 |
| 24 mo | $12,000 | $8,000 | $4,790 (your inputs) | $4,790 | $4,790 |
| 36 mo | $18,000 | $12,000 | $6,000 | $4,790 | $4,790 |
| 48 mo | $24,000 | $16,000 | $8,000 | $4,790 | $4,790 |
What is driving this result
- Posted-rate method: your discount at signing was 7.04% posted − 4.79% your rate = 2.25% points. Today's comparison rate is 6.54% (ATB Financial posted 2-year, collected Nov 1, 2026) − 2.25% = 4.29%.
- IRD = $400,000 × (4.79% − 4.29%) × 24 ÷ 12 months = $4,000. Three months' interest = $4,790. Lenders charge the greater, so three months' interest applies.
- Breaking now and taking 4.49% for the 24 months left would save about $2,400 of interest, $2,390 less than the penalty.
Your saved scenarios
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See each lender's posted and special rates on the full rate table, or how posted and special rates differ in our guide.
Assumptions & sources
Assumptions
- Closed fixed-rate mortgage: the penalty is the greater of three months' interest and the IRD (FCAC). Variable-rate mortgages usually charge three months' interest only.
- IRD = balance × (your rate − comparison rate) × months left ÷ 12. Some lenders discount this to present value, which makes it a little smaller.
- Posted-rate method: comparison rate = today's posted rate for the term closest to the time left, minus the discount you got at signing (posted then − your rate). Published-rate method: the lender's current rate for that term.
- "Closest term" varies by lender (some round down). Lender posted rates are read off their own pages on the date shown; the Bank of Canada posted rate is a typical big-bank figure.
- Interest saved is a simple estimate on the current balance; it ignores fees and the shrinking balance.
Sources
- Financial Consumer Agency of Canada — Reduce prepayment penalties. Checked .
- Financial Consumer Agency of Canada — Breaking your mortgage contract. Checked .
- Justice Laws — Interest Act (R.S.C. 1985, c. I-15), ss. 6 and 10. Checked .
- Bank of Canada — Posted conventional mortgage rate, 5-year (series V80691335) (effective October 28, 2026). Checked .
- ATB Financial — Mortgage rates page. Checked .
How the penalty is worked out
Three months' interest is the balance × your rate × 3 ÷ 12. The IRD is the balance × (your rate − the comparison rate) × the months left ÷ 12. What changes between lenders is the comparison rate.
- Posted-rate method (most big banks): today's posted rate for the term closest to the time left, minus the discount you got at signing.
- Published-rate method (many mortgage lenders that only sell through brokers): the lender's current rate for the time left, with nothing added back.
Checked against FCAC's example
The Financial Consumer Agency of Canada illustrates a $200,000 balance at 6% with 36 months left and a 4% comparison rate. Our engine gives three months' interest of $3,000 and an IRD of $12,000, matching FCAC's $3,000 and $12,000.
| Balance | $200,000 |
|---|---|
| Your rate | 6.00% |
| Months left | 36 |
| Comparison rate | 4.00%lender's current rate for the time left |
| Three months' interest | $3,000FCAC: 3,000 |
| IRD | $12,000FCAC: 12,000 |
| Penalty (the greater) | $12,000 |
Worked example: the same mortgage, two methods
| Method | Comparison rate | IRD | Three months' interest | Penalty |
|---|---|---|---|---|
| Posted rate: 6.05% posted 3-year today − (6.49% posted at signing − 4.68%) discount | 4.24% | $5,280 | $4,680 | $5,280 |
| Published rate: a current rate of 4.13% for the time left | 4.13% | $6,600 | $4,680 | $6,600 |
Same borrower, same balance, two answers $1,320 apart. Under the posted-rate method, the bigger the discount you got at signing, the bigger the IRD, because the whole discount is subtracted from today's posted rate. The method is in your mortgage contract's information box; lenders must tell you how they calculate it.
Frequently asked questions
How is a mortgage penalty calculated in Canada?
On a closed fixed-rate mortgage, the penalty is usually the higher of three months' interest and the interest rate differential (IRD). FCAC's example: a $200,000 balance at 6% with 36 months left and a 4% comparison rate gives three months' interest of $3,000 and an IRD of $12,000, so the penalty is $12,000.
Why do penalties differ so much between lenders?
Because lenders pick different comparison rates. Most big banks use posted rates: today's posted rate for the time left, minus the discount you got when you signed. Others use their current rate for the time left. Which is larger depends on how today's posted-to-special gap compares with the discount you got. Take $400,000 signed in November 2024 at 4.68% for 5 years, when the typical big-bank posted 5-year rate was 6.49%. With 36 months left and today's posted 3-year rate at 6.05%, the posted-rate penalty is $5,280. Using a published-rate method with a 4.13% comparison rate, it is $6,600. When rates have risen since you signed, IRD penalties shrink under both methods.
What's the penalty on a variable-rate mortgage?
Usually three months' interest on the balance at the current rate. That's one reason variable mortgages are cheaper to break.
Can I avoid the penalty?
Options include waiting for renewal, porting the mortgage to a new home, a blend-and-extend with your current lender, or using your annual prepayment privilege before you break (if your contract allows). For a term longer than five years, the Interest Act caps the charge at three months' interest after five years.
Primary sources
- Financial Consumer Agency of Canada — Reduce prepayment penalties. Checked .
- Financial Consumer Agency of Canada — Breaking your mortgage contract. Checked .
- Justice Laws — Interest Act (R.S.C. 1985, c. I-15), ss. 6 and 10. Checked .
- Bank of Canada — Posted conventional mortgage rate, 5-year (series V80691335) (effective October 28, 2026). Checked .