Two mortgage offers with nearly the same rate can cost very different amounts once you count what happens if you break the mortgage, prepay it, move or switch lenders at renewal. This guide sets out what to compare and gives a worksheet for lining up to three offers. For the payment on any single offer, use the mortgage payment calculator; the other tools are in the calculator directory.
What to compare
| Factor | What to ask | Why it matters |
|---|---|---|
| Rate and total cost over the term | The rate, the payment, and the interest you would pay over the term | The rate difference compounds into dollars over five years |
| Penalty method | How the lender calculates the interest rate differential, and which comparison rate it uses | Can be the biggest cost difference between offers if you break the mortgage |
| Prepayment privileges | The annual lump-sum limit and the payment-increase limit | How fast you can pay down without a penalty |
| Portability | Whether you can move the mortgage to a new home, and the time limit | Avoids a penalty if you sell and buy during the term |
| Charge type | Standard or collateral charge | Affects the cost and ease of switching lenders at renewal |
| Rate hold and other terms | How long the rate is held, cash back, who pays the appraisal and legal fees | Smaller items that can tip a close comparison |
Total cost over the term
A like-for-like rate comparison is the interest you pay over the term at each rate, on the same loan and amortization.
On a $500,000 mortgage over 25 years with a 5-year term:
| Offer A | Offer B | |
|---|---|---|
| Rate | 4.49% | 4.59% |
| Monthly payment | $2,765 | $2,792 |
| Balance after 5 years | $438,909 | $439,633 |
| Interest over the 5-year term | $104,784 | $107,180 |
A tenth of a percentage point costs $2,395 in interest over the five years on this loan, and Offer B also leaves $724 more owing at renewal.
The rate is only part of the cost, though. Where offers come with different terms, work out the cost in two cases: keeping the mortgage for the full term, and breaking it partway (selling, refinancing or moving without porting).
The penalty method
Breaking a closed mortgage, paying it off early or prepaying more than your privileges allow usually costs the higher of 3 months' interest and the interest rate differential (IRD) on a fixed rate, and typically 3 months' interest on a variable rate; your mortgage contract sets the exact method and comparison rate, and a federally regulated lender must tell you how it calculates the penalty.The comparison rate used for the interest rate differential varies by lender, and a method based on posted rates can produce a much larger penalty than one based on the rate you actually pay. Ask each lender for its method in writing; how a mortgage penalty is calculated walks through both, and the mortgage penalty calculator estimates one.
Prepayment privileges
Most closed mortgages allow a yearly lump sum up to a percentage of the original balance and a yearly payment increase up to a percentage of the payment. If you expect to pay extra, a higher limit has real value; the extra payment calculator shows what extra payments save, and prepayment privileges compares how lenders set the limits.
Portability and charge type
- Portability. A portable mortgage can move with you to a new home, usually within a set number of days of selling, so you avoid a penalty and keep your rate. Porting a mortgage covers how it works and what lenders require.
- Charge type. A collateral charge is registered for more than the loan, which makes it easier to borrow more later without re-registering but means a new lender has to register its own charge when you switch at renewal. Collateral vs conventional mortgages explains the trade-off.
Cash-back offers come with a higher rate, and the cash usually has to be repaid if you break the mortgage early; cash-back mortgages compares the two costs.
Worksheet for up to three offers
Fill in each offer from the lender’s written commitment, not a verbal estimate.
| Offer 1 | Offer 2 | Offer 3 | |
|---|---|---|---|
| Lender | |||
| Fixed or variable | |||
| Rate | |||
| Term | |||
| Amortization | |||
| Monthly payment | |||
| Interest over the term | |||
| Balance at the end of the term | |||
| Penalty method (3 months’ interest, IRD on contract rate, IRD on posted rate) | |||
| Estimated penalty if broken halfway | |||
| Annual lump-sum privilege (% of original balance) | |||
| Annual payment-increase privilege (%) | |||
| Portable? Time limit? | |||
| Charge type (standard or collateral) | |||
| Rate hold (days) | |||
| Fees the lender covers (appraisal, legal) | |||
| Cash back, and repayment terms |
A simple scoring guide
If the numbers don’t settle it, score each offer on the features that matter to you. One way to do it:
| Feature | Points |
|---|---|
| Rate | 3 for the lowest, 2 for the next, 1 for the highest |
| Prepayment privileges | 3 for the most generous, down to 1 for the most restrictive |
| Penalty method | 3 for three months’ interest only, 2 for an IRD on your contract rate, 1 for an IRD on posted rates |
| Standard charge | 2 for a standard charge, 0 for collateral |
| Portable | 1 if yes |
| Rate hold | 1 for the longest hold |
| Fees covered | 1 if the lender pays the appraisal or legal fees |
Weight the points to your plans: if you may move within the term, the penalty and portability rows matter most; if you will stay and prepay, the privileges do.
Questions to ask each lender
- How do you calculate the penalty on this mortgage, and which rate do you compare against?
- What are the annual lump-sum and payment-increase limits?
- Is the mortgage portable, and within how many days of a sale?
- Is the charge standard or collateral, and what does a switch at renewal cost?
- How long is the rate held, and is there a rate drop guarantee before closing?
Rates themselves are covered on current mortgage rates, choosing between fixed and variable on fixed vs variable mortgages, and working with banks, brokers and online lenders on comparing mortgage lenders and brokers.
Sources
The figures and rules on this page come from these sources, last checked against them between September 29, 2026 and October 2, 2026. How we check facts.
- Bank of Canada: Conventional 5-year mortgage rate (data series)
- Bank of Canada: Conventional 5-year mortgage rate (data series)
- Bank of Canada: Conventional 5-year mortgage rate (data series)
- Bank of Canada: Data table
- Financial Consumer Agency of Canada: Breaking your mortgage contract
- Financial Consumer Agency of Canada: Mortgage fees: Prepayment penalties
- RBC: Variable Rate Mortgage | RBC Royal Bank of Canada