- Terms commonly run from 1 to 10 years; the 5-year is the most common reference.
- Fixed rates in Canada are compounded semi-annually, not in advance (Interest Act s.6).
- Typical posted rates (Bank of Canada, 2026-10-28): 1-year 5.49%, 3-year 6.05%, 5-year 6.19%.
- Breaking early: the greater of 3 months’ interest and the IRD.
What you are choosing
Term length is a bet on stability. A shorter term renews sooner (at whatever rates are then), a longer term buys certainty. For terms over five years, the Interest Act lets individual borrowers repay after the fifth anniversary with 3 months’ interest.
Fixed-rate payments are calculated with semi-annual compounding. The payment calculator uses the same convention.
Penalties are where fixed mortgages differ
Each bank publishes how it calculates the penalty on a fixed closed mortgage. Read them side by side before you choose:
| Bank | Penalty method, in the bank’s words |
|---|---|
| RBC Royal Bank | Greater of 3 months’ interest or IRD vs RBC’s posted rate for a similar term, less your rate reduction. Variable: 3 months’ interest. |
| TD Canada Trust | Higher of 3 months’ interest or IRD using TD’s posted rate for a similar mortgage minus your discount. Variable: 3 months’ interest. |
| Scotiabank | Greater of 3 months’ interest or IRD vs Scotiabank’s posted rate for the closest term, less your discount. Variable: 3 months’ interest. |
| BMO Bank of Montreal | See BMO’s prepayment calculator and prepayment-options PDF (formula not on the pages we could read). |
| CIBC | Greater of 3 months’ interest (at your rate + discount) or IRD vs CIBC’s current posted rate. Variable: 3 months’ interest at CIBC Prime. |
| National Bank | Higher of 3 months’ interest or 1 month’s interest (max $500) plus the interest differential. Variable: 3 months’ interest. |
Rules change. Every figure on this page links to the official source and shows when we checked it. If something looks out of date, tell us and we will re-check.
Frequently asked questions
Fixed or variable?
Fixed gives a known payment and usually a larger penalty if broken; variable usually moves with prime and carries a 3 months’ interest penalty. If there is a real chance you will move or refinance within the term, factor in the penalty with the bank vs broker tool’s break scenario.
Sources
- Valet API: posted conventional mortgage rates (V80691333–35), prime (V80691311), policy rate (V39079) — Bank of Canada, checked Oct 31, 2026
- Interest Act (R.S.C. 1985, c. I-15), ss. 6 and 10 — Justice Laws, checked Oct 31, 2026
- Reduce or avoid prepayment penalties — FCAC, checked Oct 31, 2026
- Mortgage terms and amortization — FCAC, checked Oct 31, 2026
Educational information only, not financial, legal or tax advice. BankMortgages.ca is independent and is not affiliated with, endorsed by or paid by any bank named on this site. Bank terms change: confirm every rate and term with the lender and the official sources linked on each page before you act. Read the full disclaimer.