Hello Anon, the best source for the penalty calculation is your bank. They have all the info on the system and the calculator built in to give you a very close estimate on the penalty to break. I say close estimate because in a lot of cases the penalty is only accurate on the actual day of payoff due to the effect that a change in interest rates may have on that penalty. If you want to calculate the penalty on your own here is how you can get at least a rough estimate on your own -> Paying off your mortgage before the term ends may require you pay a penalty but it is different for different types of mortgages. If you have an open mortgage it 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 compares how much money in interest you will save at today`s rates on your current mortgage balance and remaining term and that difference is the penalty to break. A step by step method is to use a mortgage calculator and input your remaining mortgage amount and your remaining mortgage term with the best rate available from your bank for the closest available term. The resulting interest paid to the bank over the remaining months is deducted from the interest you are expected to pay with your current mortgage, that difference is roughly your penalty. In this way clients don`t jump ship to another bank when the rates get better. I hope this information was helpful, if you or any reader would like me to do the calculations for them, no obligation, please don`t hesitate to call me at: Abraham Niyazi - Mortgage Agent - Lic#M08010640 - Centum One FInancial Corp - Lic 10758. Cell: 416-993-4082 Toll Free: 1-866-728-3708 x 115 http://www.centum.ca/abraham_niyazi/ I deal with 25 Banks/lenders and can do mortgages across Canada except Quebec. Please Google my name to access my various articles and videos on many mortgage related topics.

No, you will not encounter any penalties if you switch from your current variable rate to a 5 year fixed rate with the same bank in Canada. The banks want you locked in to collect the interest and to have you as a long term client.

I doesn`t matter if you break 3 years later or 6 month before the term ends. You will pay the same mortgage penalty, 3 month mortgage interest or Interest Rate Deferential penalty.