What is a mortgage break fee and when do I pay it?

Short answer: Fee for ending fixed mortgage early. Depends on rate changes since you fixed. Can be zero or thousands.

What this actually means in plain English

If you end a fixed-rate mortgage early, the bank charges a break fee. It covers the interest they expected to earn. If rates have risen since you fixed, the fee might be small or zero. If rates have fallen, the fee can be thousands. Always ask for the break fee before breaking. Sometimes refinancing saves money despite the fee.

Key Facts

Only applies to fixed-rate mortgages
Based on difference between your rate and current rates
Rates risen since fixing: small or zero fee
Rates fallen since fixing: larger fee
Always get quote before breaking
Sometimes refinancing still saves money despite fee

Example

Fixed Rate: 6.5%

Current Rate: 7.0%

Rate Difference: +0.5%

Break Fee: $0 (rates rose)

Alternative Scenario: If current rate 5.5%, fee could be $8,000

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