How the Mortgage Prepayment Penalty Calculator works
Estimate a mortgage prepayment penalty. Adjust the inputs above, then use the calculate button to generate a fresh estimate based on the numbers you entered.
The result is designed to give you a quick planning number, plus a short breakdown of the major figures behind it. You can reset the form at any time and try a different scenario.
When to use this calculator
Use this mortgage prepayment penalty calculator before paying extra, refinancing or breaking a mortgage early. It gives a simple estimate using three months of interest and an optional interest-rate-differential amount.
Formula
Estimated penalty = max(three months of interest, interest-rate-differential estimate)
- Prepayment amount is the amount being paid early.
- Three months of interest estimates a common variable-rate penalty style.
- Interest-rate differential is entered separately when a lender provides or estimates it.
Worked example
For a $50,000 prepayment at a 5% mortgage rate, three months of interest is estimated and compared with any entered interest-rate-differential amount.
Common mistakes
- Assuming the calculator can reproduce every lender penalty formula.
- Ignoring annual prepayment privileges before estimating a penalty.
- Forgetting that fixed-rate penalties can be much higher than three months of interest.
FAQs
What is an interest-rate differential?
It is a lender calculation that may compare your contract rate with a current comparison rate for the remaining term.
Is this exact enough for breaking a mortgage?
No. Use it as a planning estimate and request the official payout statement from your lender.
Can I avoid a penalty?
You may be able to stay within prepayment privileges or wait until renewal, depending on your mortgage terms.