Hello Mariah, there often will be a penalty to break your mortgage with the lender you are with. Unless you have an open mortgage which does not carry a penalty to break. If you are not sure if you have an open mortgage or closed mortgage, chances are you are in a closed mortgage. (Open mortgages have higher interest rates and are not often offered by lenders unless the client specifically asks for them due to the chances of breaking the mortgage) The exact calculations vary from lender to lender and are spelled out in the terms of the mortgage agreement you received when you set up your mortgage to begin with. The basics are as follows. For a variable rate mortgage you will most likely be charged 3 months interest penalty (The next 3 months interest due on your mortgage payments basically). If you have a fixed mortgage rate then things get tricky. You will be charged 3 months interest penalty or Interest Rate Differential (IRD). The first is the same as before but IRD is a whole different animal. It can get quite costly and is designed to prohibit movement of the mortgage to another lender due to a better rate environment. If the rates in the marketplace are higher than the rate you currently have on your mortgage you will be most likely charged the 3 month penalty. If the rate environment is such that rates are lower than what you have currently the IRD is often charged. The IRD calculates how much money you will save at today`s rates on your current mortgage balance and remaining term and charges you roughly that amount to break. In this way clients don`t jump ship when the rates get better. The calculations are not perfect however and many of my clients have broken their mortgage and taken it to another bank even though they are not selling or moving. Just how much you save varies on your specific mortgage and the rates available. Only specific calculations to your current mortgage situation can tell you if it makes sense for you. I hope this information has been helpful Mariah, I would be happy to do some calculations for you or any reader, no obligations. Please do not hesitate to call. Abraham Niyazi - Mortgage Agent - Lic#M08010640 - Centum One FInancial Corp - Lic 10758. Cell: 416-993-4082 Toll Free: 1-866-728-3708 x 115 www.centum.ca/abraham_niyazi/ I deal with 25 Lenders/Banks and can do mortgages across Canada except Quebec.

Penalties could be severe if you break your fixed mortgage rate. Please watch this video which explains the cancellation procedure. http://www.youtube.com/watch?v=xRNFyKStzrY

If you have fixed rates, you would be charged with IRD. Variable rate mortgages are given 3 months interest as penalty. It is better to ask for an estimate with RBC before breaking your mortgage. Normally, I blend this penalty to the new mortgage to eliminate cash out. I only recommend doing this if it makes money sense, otherwise I would tell clients to wait a while to reduce the penalty.