RateReset Canada guide
Understanding mortgage prepayment penalties
Learn the common Canadian penalty methods and how to request a reliable payout figure.
Three months’ interest
A simple estimate multiplies the outstanding balance by the annual contract rate and by three-twelfths. Lender treatment of the effective rate, timing, and other amounts can differ.
Interest rate differential
IRD attempts to estimate interest the lender loses when the contract rate exceeds a comparison rate for the time remaining. Posted-rate discounts and the choice of comparison term can create large differences between lenders.
Request the complete payout
Ask for the penalty, discharge fee, accrued interest, cashback clawback, and the date through which the quote is valid. Add legal and registration costs before judging a refinance.
Estimates are for educational purposes and may differ from lender calculations, contractual terms, taxes, fees, or regulatory requirements. Read the full disclaimer.
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Methodology version: mortgage-methodology-2.0. See the editorial policy and corrections process.