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 Prepayment charge calculation examples
 Prepayment charge calculator
Prepayment charge calculation examples
The values shown in the table are used throughout all of the examples below:
Annual Interest Rate:  3% 
Mortgage Balance:  $285,250 
Term remaining:  31 months 
Our Current Reinvestment Rate (CRR):  2.5% 
Closed Variable Rate Mortgage, Lock & Roll Mortgage and Adjustable Rate / Adjustable Payment Mortgage examples
Example 1: Full repayment of the mortgage loan
(Mortgage Balance x Annual Interest Rate) / 4 = prepayment charge
($285,250 x 3%) / 4 = $2,139.38
$285,250 x 3% = $8,557.50 $8,557.50 / 4 = $2,139.38 = prepayment charge
Example 2: Partial prepayment of the mortgage loan
If you wish to prepay a part, but not all, of your mortgage balance, the same formula applies. Simply input the lump sum or prepayment amount you wish to make, in place of the Mortgage Balance in the formula. If the amount of the prepayment is $35,000 then:
(Mortgage Balance x Annual Interest Rate) / 4 = prepayment charge
($35,000 x 3%) / 4 = $262.50
$35,000 x 3% = $1,050 $1,050 / 4 = $262.50 = prepayment charge
Closed Fixed Rate Mortgage examples
Example 1: Full repayment of the mortgage loan

Step 1: Determining the three month interest calculation:
(Mortgage Balance x Annual Interest Rate) / 4 = three month interest prepayment charge
($285,250 x 3%) / 4 = $2,139.38
$285,250 x 3% = $8,557.50 $8,557.50 / 4 = $2,139.38 = three month interest prepayment charge 
Step 2: Determining the Simplified IRD Calculation:
Mortgage Balance x (Annual Interest Rate – CRR) / 12 x term remaining = simplified IRD prepayment charge
$285,250 x (3%  2.5%) / 12 x 31 = $3,684.48
(3%  2.5%) = .5%
$285,250 x .5% = $1,426.25
$1,426.25 / 12 = $118.85
$118.85 x 31 = $3,684.48 = Simplified IRD prepayment charge 
Step 3: Determining the applicable prepayment charge:
The three month interest prepayment charge is $2,139.38
The Simplified IRD prepayment charge is $3,684.48
The greater of the two prepayment charge amounts will apply so the prepayment charge is $3,684.48
Example 2: Partial prepayment of the mortgage loan
If you wish to prepay a part, but not all, of your mortgage balance, the same formulae apply. Simply input the lump sum or prepayment amount you wish to make, in place of the mortgage balance in the formula. If the amount of the prepayment is $35,000 then:

Step 1: Determining the three month interest calculation:
(Mortgage Balance x Annual Interest Rate) / 4 = three month interest prepayment charge
($35,000 x 3%) / 4 = $262.50
$35,000 x 3% = $1,050 $1,050 / 4 = $262.50 = three month interest prepayment charge 
Step 2: Determining the IRD calculation:
The prepayment charge under an IRD calculation may be estimated using the simplified IRD calculation:
Mortgage Balance x (Annual Interest Rate – CRR) / 12 x term remaining = simplified IRD prepayment charge
$35,000 x (3%  2.5%) / 12 x 31 = $452.08
(3%  2.5%) = .5%
$35,000 x .5% = $175.00
$175 / 12 = $14.583
$14.58 x 31 = $452.08 = Simplified IRD prepayment charge 
Step 3: Determining the applicable prepayment charge:
The three month interest prepayment charge is $262.50
The Simplified IRD prepayment charge is $452.08
The greater of the two prepayment charge amounts applies so the prepayment charge is $452.08