Bank offer vs broker offer: what each really costs
Enter two mortgage offers. We add up interest, fees and cashback, and the penalty if you break early, the way lenders calculate it.
Offer B is cheaper by about $5,497weighting a 30% chance you break at month 30 after rates fall 1 pts
Offer B breaks even with Offer A at4.60%Above this rate, Offer B costs more than Offer A on the same assumptions. Offer B today: 4.38%.
- Monthly payment A / B
- $3,348 / $3,281
- Keep to term: A / B
- $128,328 / $122,582
- interest + fees − cashback
- Penalty at month 30: A
- $16,125
- IRD at a 3.44% comparison rate
- Penalty at month 30: B
- $14,122
- IRD at a 3.38% comparison rate
Estimate, not advice. Penalties follow FCAC's description of the two IRD methods; your contract sets the exact formula. Not an offer of credit.
Offer B cheaper by $5,497
What is driving this result
- Rate gap: Offer B is 0.20% lower, worth about $5,746 of interest over a full term.
- Penalty if you break at month 30: A $16,125 vs B $14,122. A's posted-rate method subtracts your 1.61% discount from the comparison rate, which is why it can run higher.
- Fees and cashback: A $0 net, B $0 net.
- Ask each lender for its prepayment calculator and penalty formula in writing; federally regulated lenders must explain it (questions for your offer).
| Break at month ↓ / Lenders' rates by then → | rise 1 pt | no change | fall 0.5 pt | fall 1 pt | fall 1.5 pt | fall 2 pt |
|---|---|---|---|---|---|---|
| Month 12 | $1,471 | $1,471 | $4,467 | $4,475 | $4,482 | $4,490 |
| Month 24 | $2,632 | $2,632 | $4,754 | $4,765 | $4,777 | $4,788 |
| Month 30 | $3,207 | $3,207 | $4,906 | $4,917 (your inputs) | $4,929 | $4,940 |
| Month 36 | $3,779 | $5,203 | $10,788 | $11,328 | $11,339 | $11,350 |
| Month 48 | $4,912 | $4,912 | $5,211 | $7,928 | $8,450 | $8,457 |
Show the numbers
| Interest until the break | Penalty | Fees − cashback + clawback | |
|---|---|---|---|
| Offer A | $66K | $16K | $0 |
| Offer B | $63K | $14K | $0 |
Your saved scenarios
Saved in this browser only. Nothing is sent to us.
Assumptions & sources
Assumptions
- Fixed rates compound semi-annually (Canadian convention); monthly payments; principal and amortization are the same for both offers.
- Penalty if broken: fixed rate = the greater of 3 months' interest and the interest rate differential (IRD); variable or '3 months' = 3 months' interest (FCAC).
- Contract-rate IRD compares your rate with the lender's current rate for the remaining term (your rate − the fall you set). Posted-rate IRD compares it with the current posted rate for the remaining term minus the discount you got at signing (posted − your rate). For the posted rate on the remaining term we use today's Bank of Canada 1-, 3- and 5-year posted rates (5.49% / 6.05% / 6.19%, week of 2026-10-28).
- Clawed-back cashback is repaid pro-rata for the unexpired part of the term (a common contract term; check yours).
- Weighted cost = (1 − chance) × cost if kept + chance × cost if broken. It's a way to compare two offers on the same assumptions, not a forecast.
Sources
- Financial Consumer Agency of Canada — Mortgage fees: prepayment penalties (effective October 15, 2025). Checked .
- Financial Consumer Agency of Canada — Code of conduct: mortgage prepayment information (effective September 24, 2025). Checked .
- Justice Laws — Financial Consumer Protection Framework Regulations (SOR/2021-181) (effective June 30, 2022). Checked .
- Justice Laws — Interest Act, R.S.C. 1985, c. I-15, s. 6. Checked .
- Bank of Canada — Posted conventional mortgage rate, 5-year (series V80691335) (effective October 28, 2026). Checked .
- Bank of Canada — Posted conventional mortgage rate, 3-year (series V80691334) (effective October 28, 2026). Checked .
- Bank of Canada — Effective rate on new uninsured fixed mortgages, 5 years and over (series V122667786) (effective August 1, 2026). Checked .
Bank vs broker mortgage offer comparison · Powered by TorontoMortgageBroker.ca · MITEY