What does it cost to break a variable-rate mortgage? What five big banks say
Breaking a closed variable-rate mortgage usually costs three months' interest. The detail that changes the bill is which rate the bank multiplies by.
If you want out of a closed variable-rate mortgage early, the charge is usually the simple one. At the five big banks we checked, each says it is three months' interest. The part that differs is the interest rate used to work it out.
What do five banks say?
Each bank's own published information, checked November 6th, 2026. Your contract decides. Terms vary by product. General information, not advice.
Sources, each checked on November 6th, 2026: TD), RBC, BMO, CIBC and Scotiabank.
Why does the rate matter? If your mortgage rate is below prime, which is common on variable mortgages, a bank that multiplies by its prime rate charges more than one that uses your own rate.
Good to know
Whose prime rate?
Prime is not one number set by the Bank of Canada. Each bank sets its own prime rate, based on its cost of funding, which is influenced by the Bank of Canada's overnight rate target. The Bank publishes the most typical prime rate across the six major banks: 4.70% on November 4th, 2026, up from 4.45% the week before.
TD prices its variable mortgages off the TD Mortgage Prime Rate. CIBC uses the CIBC Prime Rate, which it defines as the variable rate it declares as prime for Canadian dollar loans. So prime can differ from one lender to the next, and "prime minus 0.50%" at one bank is not the same rate as "prime minus 0.50%" at another. Ask your lender which prime it uses and what it is today.
Sources: Bank of Canada posted interest rates, TD, CIBC, checked November 6th, 2026. General information, not advice.
What does it look like in dollars?
Here is an illustration, not a quote. Say the amount subject to the charge is $500,000 and the rate used is 4.5%. Three months of interest is about $500,000 x 0.045 x 3/12, or $5,625. The bank's exact calculation can differ, so ask for a dated payout statement before you decide to break the mortgage.
The same arithmetic shows what a rate hike does. When the Bank of Canada raised its policy rate by 0.25% on October 28th, variable rates followed, and on $500,000, 0.25% is about $313 more over three months (0.0025 x $500,000 / 4). The Bank of Canada's weekly table of the major banks' typical prime rate moved from 4.45% on October 28th to 4.70% on November 4th (Bank of Canada). The $313 is an illustration. Your lender's contract decides which rate is used.
Can you reduce it?
Extra payments within your prepayment privileges can avoid a charge. Your allowance is set by your mortgage. TD says it can be up to 15% of the original amount each calendar year, CIBC says closed mortgages often allow 10% to 20%, and BMO says 20% for most closed mortgages and 10% for a BMO Smart Fixed Mortgage. RBC says using all its prepayment options could allow 20% or more of the original balance a year, and that some options can only be used once a year.
One practical point from BMO: use your allowable prepayment options before you pay the mortgage off in full, and before you ask for a payout statement. None of the pages we read says an unused allowance is deducted automatically when you pay the whole mortgage off, so do not assume it is. Ask.
What about an open mortgage?
An open mortgage lets you repay any amount at any time without a prepayment charge, but usually at a higher rate (TD, CIBC). Scotiabank's brochure adds that an administration fee may apply if you pay off an open mortgage in the first year.
Is the charge the whole cost?
Not always. CIBC lists a discharge fee or an assignment fee on a full prepayment, and a repayment of any cashback you received. RBC says you must repay part of any cashback if you prepay before the end of the term. Ask each bank for the full list in writing.
What should you ask your lender?
Which rate do you use to work out the three months of interest: my mortgage rate, or your prime rate? If I have a capped-rate product, which rate applies? How much can I prepay without a charge this year, and should I use it before I pay out? What other fees apply? Then get a dated payout statement. A verbal estimate is not a quote.
From Properti Edge
Get ready for the call to your lender
Ask the Properti Edge AI Advisor to explain terms like prepayment charge, prepayment privilege and payout statement in plain language, so you know what to ask before you call. It answers like this:
In Canada, breaking a variable-rate mortgage is generally much more straightforward and less expensive than breaking a fixed-rate mortgage.
1. The standard calculation
For most variable-rate mortgages in Canada, the prepayment penalty is simply three months of interest.
Answer given November 6th, 2026. Shortened here to the opening line and one sentence from section 1.
Properti Edge does not calculate your penalty. Your lender does. General information, not advice.
This is general information, not advice. Speak to a mortgage broker or lender, depending on your situation, before acting.
