We don't use one generic IRD formula across every lender. For the lenders we've researched directly (about 36 of them), the penalty is sourced - priced with that lender's own published prepayment method. For everyone else we still produce a number, but we tell you when it leans on an assumption or an estimate so you know how far to trust it.
Why Lender-Specific Math Matters
Different lenders use different comparison rates in their IRD calculation:
- Posted minus discount - today's posted rate for the matching term, minus the discount you received at signing (most of the Big Six).
- Current posted - today's posted rate with no discount subtracted, which reads higher.
- Rate gap at signing - the posted rate when you signed minus today's posted rate (CIBC-style).
- Current offered rate - the rate the lender would charge today for a new mortgage of the same remaining length, not an inflated posted rate. This is how most monolines (First National, MCAP, Merix, Manulife, and similar) actually calculate, which keeps their penalties closer to three months' interest.
- Government of Canada bond yield - a small number of lenders (Equitable, Bridgewater) compare against the GoC benchmark yield for the matching term instead of a posted rate, which tends to produce larger penalties.
- Prime-based math for variable mortgages.
A generic formula would be wrong half the time. Lender-specific math gets us close to the lender's actual quote.
Where Our Sourced Math Comes From
For the sourced lenders, we pull from that institution's publicly shared disclosures:
- Prepayment penalty calculation methodology documents.
- Mortgage commitment letter standard charge terms.
- Posted rate history for the comparison rate inputs.
When a lender updates their disclosed methodology, we update our math.
Wherever a lender publishes a worked example in their disclosure, we re-run it through our calculator and confirm we land on the same dollar figure. Open the Where this comes from panel on any penalty result to see which documents we used and a plain-language explanation of how that lender's penalty works. We do not have a first-party disclosure for every lender in the country, so a figure outside the sourced set falls back to an estimate and gets flagged (below).
When You Set The Penalty Manually
If you've entered the real penalty for a client (for example, from a lender's payout statement), that manual figure drives the client's savings and reports instead of the calculated number. You can also force the penalty type - IRD or three months' interest - when you know which method the lender will actually apply; the penalty then follows that method's calculated figure. See Reviewing A Candidate for how to set and reset both.
The penalty breakdown keeps showing the calculated IRD and three-month-interest math so the explanation stays intact, and it adds a short note pointing out that the manual figure overrides the calculated amount across savings and reports. That's why the headline penalty can differ from the numbers in the breakdown.
Variable-Rate Mortgages
Variable-rate mortgages are always charged three months' interest. Lenders don't apply an interest-rate differential to a variable rate, so the IRD figure is never the one that applies. The penalty breakdown still shows the IRD math next to the three-month figure so the full explanation stays intact, but the three-month interest is always the selected penalty and the one that drives the client's savings and reports.
Lenders We Source Directly
About 36 lenders are sourced out of the box - every "Big Five" bank plus the major monolines, credit unions, and B lenders we've read disclosures for. Common ones include:
- Scotiabank, TD, RBC, BMO, CIBC
- National Bank, Desjardins
- MCAP, First National, Merix, Manulife
- B2B, Equitable Bank, Home Trust
- ...and more
If your client's lender isn't sourced, you can still add a custom lender with your own rate data: Adding A Custom Lender.
The Penalty Calculator Roster
The penalty calculator only offers the sourced lenders, plus three generic catch-alls at the bottom for when the client's lender isn't one we price first-party:
- General A-Lender and General B-Lender - the standard interest-rate-differential (today's posted rate minus your original discount).
- Private Lender - assumes three months' interest, the typical private-lender penalty.
Each of these three is flagged as a generic estimate in the result, so you always know to confirm against the actual lender's terms.
When We Flag A Penalty
On a candidate's rate analysis we classify every penalty figure and flag anything that isn't sourced, so you always know how much to trust the number:
- Sourced (no flag) - priced with the lender's own published method and a lender-specific rate curve (big-bank posted-minus-discount, CIBC and National Bank posted-at-signing, monoline reinvestment, Equitable and Bridgewater bond yield).
- Private / MIC - flagged "we assumed three months' interest." Most private and MIC lenders price prepayment this way; confirm on the commitment.
- Reverse mortgage - flagged that the penalty follows a declining percentage-of-balance schedule (often 5-8% in the early years). The figure we show is a floor; confirm the exact charge with the lender.
- Recognized but not sourced - flagged "we don't have this lender's specific penalty calculation; this uses a fallback estimate, double-check against the lender." The fallback is the generic current-posted IRD (today's posted rate with no discount credited) or a method inferred from the lender's category. Treat it as a ballpark.
- Unidentified - the lender name didn't resolve to a known institution, or there's no lender on file, so there's no method to apply. Edit or add the lender on the candidate to the exact institution and the math switches to its real method.
The flag sits in the Flags section of the candidate's rate analysis, next to the other review prompts.
When To Treat Our Number As Conservative Vs Aggressive
- Conservative - most lender-specific formulas in our system err slightly on the high side (better to overestimate a penalty than under-promise savings to a client).
- Always confirm with the lender before locking in a refinance, especially on large balances.
What To Do Next
- See how lender math drives candidate detection: How Candidates Are Detected.
- Add lenders we don't cover: Adding A Custom Lender.