A fee charged by your lender if you break your mortgage before the term ends. For variable rate mortgages, the penalty is typically three months' interest. For fixed rate mortgages, it's the greater of three months' interest or the Interest Rate Differential (IRD) -- which can be significantly higher. The IRD calculation varies by lender and is notoriously opaque.
Why It Matters
Breaking a fixed-rate mortgage can cost thousands -- sometimes tens of thousands -- of dollars. Before locking into a long fixed term, consider whether life changes (job move, divorce, upsizing) might force you to break early. If there's any chance, a shorter term or variable rate might save you from a painful penalty.
Related Guides
Need Guidance?
Get a second opinion on your real estate situation. No pressure, no obligation.
The RAZZ Report
Market insights and practical advice delivered to your inbox.