BREAKING A MORTGAGE — CAN YOU DO IT?
- johnathanmcquoid
- Jan 17
- 2 min read
Most homeowners assume they’ll keep their mortgage for the full 5-year term…
But the truth?
6 out of 10 Canadians break their mortgage just 38 months in.
And when that happens, the penalties can be massive if you’re not prepared.
Here’s what you need to know 👇
💥 Why People Break Their Mortgage
Homeowners break their mortgage for many reasons, including:
1️⃣ Selling and buying a new home
2️⃣ Refinancing to access equity
3️⃣ Paying off high-interest debt
4️⃣ Divorce or separation
5️⃣ Health or income changes
Life happens — and lenders know it.
But the cost of breaking early depends entirely on the type of lender you chose.
💸 Penalties: Bank vs Broker Lender
Here’s where it gets expensive.
There are two main penalty calculation methods:
✔️ Posted Rate Method (big banks)
✔️ Published Rate Method (broker-only lenders)
The difference between the two can be thousands.
Let’s break it down using a $300,000 mortgage 👇
⚠️ Big Bank Penalty (POSTED RATE METHOD)
Using posted rates + artificial “discounts,” banks often calculate:
• A higher IRD
• Using inflated posted rates
• Leading to massive penalties
Example:
On a $300,000 mortgage with 3 years left, the penalty can hit:
👉 $15,300
Yikes.
✅ Broker Lender Penalty (PUBLISHED RATE METHOD)
Broker-channel lenders use actual published rates — not inflated posted rates.
This usually results in dramatically lower penalties.
Example using the same scenario:
👉 $2,700 penalty
That’s a $12,600 difference — just based on the lender you chose.
📌 Variable Rate Penalties
If you’re in a variable rate mortgage, good news:
Penalties are usually just:
✔️ 3 months’ interest
No IRD, no inflated calculations.
🧠 Why This Matters
Because most homeowners will break their mortgage before the term ends — and they never see the penalty coming.
Choosing the wrong lender can cost you:
✔️ thousands in fees
✔️ higher interest costs
✔️ reduced flexibility
Choosing the right one can save you a small fortune.
💬 Final Thought
Breaking a mortgage isn’t uncommon — but doing it without knowing the penalty structure is a costly mistake.
If you’re thinking about refinancing, renovating, relocating, or restructuring your debt, message The Frontline Mortgage Group before you make a move. We’ll calculate YOUR penalty and show you all available options. 💬