How the mortgage penalty calculator works
The live tool stays on the penalty calculator. This page is the payout-statement checklist behind the two IRD methods — not a second copy of the worked tables.
The two contract terms that decide the answer
A Canadian closed-mortgage prepayment clause is not a market formula. It is a pair of contract terms: which rate table the lender reads, and which remaining-term bucket it treats as “closest.” Public rate series can fill the table. They cannot tell you which table your clause points at. That is why this calculator ships a single representative row and shows both methods side by side instead of naming an institution.
When you receive a payout statement, ask for those two terms in writing before you argue the dollar figure. Then rerun the tool with the same balance, contract rate, remaining months, and the comparison rate the statement used. If the arithmetic matches, the quote is applying the clause as written. If it does not, the mismatch is the question — not a vague sense that the number “feels high.”
The parent calculator already prints every intermediate step: monthly interest, the three-month product, the effective comparison rate after any origination discount, the differential, remaining years, and the greater-of result. Take that list to the statement. The same functions produce the worked examples on the tool page.
Which borrowers are actually exposed to the posted-rate method?
Two conditions have to hold at once, and they pull against each other. The contract rate has to sit above the current comparison rate, or there is no IRD to inflate. And the origination discount has to be deeper than today’s posted spread, or the posted method is not the expensive one.
That points at borrowers who signed near the top of a rate cycle while still negotiating hard: large balance, high contract rate, substantial concession off posted, years to run. Borrowers on cycle-bottom rates sit in the opposite position — differential zero, charge equal to the three-month floor, rate basis irrelevant. Screen on both conditions before promising a five-figure problem or a cheap exit. A posted-rate clause is not universally dearer; it converts a concession won at origination into a cost paid at exit.
The parent page’s worked example is the expensive case made literal: a 2.10% origination discount against a 1.95% representative posted spread produces a $2,025 gap on a $450,000 balance with three years left. Flip the discount down to today’s spread and the two columns agree. That identity is the product, not a disclaimer.