How is a mortgage break penalty calculated in Canada?

Three months' interest — balance × rate ÷ 4. On $400,000 at 5%, roughly $5,000.

Interest rate differential (IRD) — the gap between your rate and the lender's current rate for the remaining term, multiplied by your balance and the months remaining. Big 5 banks calculate it against their posted rates and deduct the discount you originally received, which inflates the result; monoline lenders typically use discounted rates and charge far less.

Ways to reduce it: port the mortgage to the new property, use your blend-and-extend option, apply the annual prepayment privilege before breaking, or wait until fewer months remain in the term. Always ask the lender for the written payout quote — the number is often negotiable at renewal time only.