Mortgage prepayment penalty 2026
For a fixed rate, lenders usually charge the greater of three months’ interest on the balance and the interest rate differential (IRD) against the posted rate for the remaining term. Enter your balance, rates, and months left.
Banks sometimes use a more complex IRD (discounts, posted curve). This model follows the common FCAC description: (contract rate − posted rate) × balance × months left ÷ 12.
- Three months’ interest
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- Interest rate differential (IRD)
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- Estimated penalty
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- Method used
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Sources. FCAC — pay off faster (new tab) · FCAC — prepayment charges (new tab) · Last updated: 27 October 2026
Frequently asked questions
When is the penalty zero?
At maturity, when prepaying within your prepayment privilege, or if your variable contract allows penalty-free payout. This calculator targets full early payout on a fixed rate.
Why compare three months and IRD?
FCAC states that lenders charge the higher of three months’ interest and the rate differential when your contract rate exceeds the posted rate for the remaining term.
Which posted rate should I use?
Use your lender’s posted rate for a term similar to the time left (often the 5-year posted if several years remain). Your bank may use a different curve: adjust the field accordingly.
Are discharge fees included?
No. Administrative or land registry discharge fees are not in this penalty. Budget for them on top of a full payout.
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