Let’s say you have a fixed-rate mortgage locked in around 6%, and your term isn’t up until late 2026. You’re paying more than $3,500 a month, and you’ve started wondering:
“Should I break my mortgage early to refinance at a lower rate?”
The short answer?
Probably.
Maybe.
It depends.
Here’s What You Need to Know First
Breaking a mortgage early can come with prepayment penalties, and those fees can eat into the potential savings—unless the numbers still work out in your favour.
Every lender has their own rules, but most penalties are based on one of two formulas:
- Three months’ interest
- Interest Rate Differential (IRD) — usually the higher of the two
That IRD calculation is based on the difference between your current rate and the rate the bank could lend at today for the same remaining term.
👉 The bigger the gap between your rate and current rates, the more it’s worth looking into.
👉 The longer you have left on your mortgage, the more time you have to make up the cost of breaking it.
Start With These Two Steps
- Read Your Mortgage Documents
Your penalty calculation method should be outlined there—look for “prepayment charge,” “IRD,” or “early payout.” If it’s not clear, don’t worry. - Talk to Your Bank or a Mortgage Broker
Your lender can give you an exact penalty amount. A broker can help you figure out whether breaking the mortgage now could save you money—even after paying the penalty.
Sometimes, the savings from a lower interest rate over the next few years can easily outweigh the cost of breaking the mortgage early—but every situation is different.
Run the Numbers Before You Decide
You don’t have to guess. At The Local Broker, we’ll help you:
- Understand your current mortgage terms
- Estimate your penalty
- Compare your current payments with what you’d pay at today’s rates
- Determine if it’s worth making a move—or waiting
And if it’s not worth it? We’ll tell you that too.
Let’s Figure It Out Together
If you’re feeling stuck between high payments and a long wait until renewal, it’s worth running the numbers. Sometimes the math is surprisingly in your favour—and sometimes, it’s better to hold tight. Either way, we’ll help you make a confident, informed decision.
Contact us today for a free, no-obligation review of your mortgage options.
