How to Compare a Mortgage Quote in Canada: Rate, Term, Penalties and Fees

Compare a mortgage quote on three things first: the interest rate, the term length, and the penalty and fee structure.

By Promissory.ca Editorial Team Reviewed against official Canadian sources Last updated: 2026-09-16

Two mortgage quotes can look identical on the first line and behave very differently over the life of the contract. The rate is the headline, but the term, the penalty formula, the prepayment privileges and the fees decide what the borrowing actually costs you.

Why a mortgage quote is more than a rate

A mortgage quote is an offer made on specific terms, not a price tag. It bundles an interest rate with a term, an amortization schedule, a penalty calculation, prepayment limits, and a set of conditions you must satisfy before funding. Change any one of those pieces and the offer changes.

That is why shopping on rate alone is risky. A quote with the lowest advertised rate may carry a restrictive penalty formula that costs far more if you sell, refinance or break the mortgage early. A quote with a slightly higher rate may include generous prepayment privileges and a penalty calculated on a discounted rate rather than a posted rate.

When you compare, treat every mortgage quote as a package. Score each one on rate, term, penalties and fees together, then decide which package fits your plan for the next few years. Promissory.ca is a comparison and information site, not a lender, so the goal here is to help you ask better questions of the licensed professionals you deal with.

What a mortgage quote actually contains

Quotes usually arrive as a rate hold, a term sheet or a written commitment. Read all four components below before you compare anything.

Interest rate and rate type

The rate is the cost of borrowing, expressed as an annual percentage. A fixed rate stays the same for the term. A variable rate moves with the lender's prime rate, which is influenced by the Bank of Canada's policy rate. A hybrid or split mortgage combines both.

The rate you see is not necessarily the rate used to qualify you. Under OSFI Guideline B-20, federally regulated lenders must qualify borrowers at the greater of the contract rate plus two percentage points, or 5.25%. That qualifying test can shrink how much you can borrow even when the quoted rate looks attractive.

Ask each lender two separate questions: what rate will I pay, and what rate will you use to test my affordability? The answers can differ, and the second answer determines your budget.

Term, amortization and the difference between them

The term is how long your current contract lasts. The amortization is how long the mortgage would take to pay off if you made every payment at the current rate. They are not the same thing, and confusing them is one of the most common mistakes when comparing mortgage quotes.

A shorter amortization means higher payments but less interest over the life of the loan. A longer amortization lowers payments but raises total interest. Minimum down payment rules also shape what you can borrow: 5% on the portion of the price up to $500,000, 10% on the portion from $500,000 to $1,500,000, and 20% above $1,500,000. A down payment under 20% requires mortgage default insurance, and the maximum amortization for an insured mortgage is 25 years.

Prepayment privileges and penalties

Prepayment privileges let you pay extra without penalty. Typical forms include increasing your regular payment, making a lump-sum payment, or both, up to an annual limit. The size of that limit, and whether it resets each year, matters if you expect bonuses, an inheritance or rental income.

Penalties matter more. If you break a fixed-rate mortgage early, the penalty is usually the greater of three months' interest or an interest rate differential calculation. Variable-rate mortgages usually carry a three-month interest penalty. The interest rate differential is where quotes diverge: the lender's posted rate, the discount you received, and the remaining time on the term all feed the formula. Some lenders calculate against a discounted rate; others use posted rates that make the penalty larger.

Ask for the penalty formula in writing, and ask for a sample calculation based on a scenario close to yours. If a lender will not explain how the penalty works, that is information in itself.

Also check whether the mortgage is portable. Portability lets you move the mortgage to a new property without breaking it, which can avoid a penalty when you relocate or upsize.

Fees and costs

Fees are often layered. A mortgage quote may include an application or origination fee, an appraisal fee, a discharge fee when the mortgage ends, a reinvestment fee on renewal, and administrative charges for documents. Some are paid upfront; others appear later on a payout statement.

There are also third-party costs: legal fees, title search and title insurance, land transfer tax where applicable, and provincial registration fees. A broker's compensation is usually paid by the lender, but ask directly whether any fee is payable by you.

Add every fee to a comparison column so an apparently cheaper rate does not win by default.

Side-by-side: how to compare two mortgage quotes

Use a table like the one below. Fill it in from the written documents each lender gives you, not from a phone conversation.

The table is not a scoring system. It is a way to see that the meaning of cheap depends entirely on what you plan to do.

How to compare mortgage quotes, step by step

1. Write down your plan: how long you expect to keep the property, whether you will renovate or refinance, and how much extra you could prepay each year.
2. Collect at least three written mortgage quotes using the same term and amortization so the comparison is fair.
3. Record the rate, rate type, term, amortization, penalty formula, prepayment privilege and every fee.
4. Ask each lender to run a penalty example for breaking the mortgage partway through the term.
5. Confirm the qualifying rate each lender will use, not just the contract rate.
6. Check whether a hard credit inquiry will be made; Equifax Canada and TransUnion Canada both record inquiries, and a hard inquiry may affect your credit score while a soft inquiry does not.
7. Read the conditions carefully, including funding dates and what happens if your closing is delayed.
8. Compare total cost, not the monthly payment alone. A mortgage payment calculator helps, but it cannot price a penalty you have not read yet.

Rules that shape every mortgage quote in Canada

Several laws set the boundaries. Under the Interest Act, where a mortgage provides for interest but does not state an annual rate, interest is not chargeable above 5% per annum, which is one reason written disclosure of the annual rate matters. The Criminal Code sets the criminal rate of interest at 35% APR, reduced from 48%.

Privacy law applies too. PIPEDA governs how organisations handle personal information in Canada, so you can ask a lender how your documents will be stored and shared, and who will see your credit report.

These rules do not choose a mortgage for you. They simply set the floor and ceiling of what can appear in a mortgage quote.

What to ask before you sign

• Is this rate held, and for how long?
• What is the exact penalty formula, and can you show me a worked example?
• What prepayment privileges are included, and do they reset each year?
• Which fees am I responsible for, and when are they charged?
• Can the mortgage be ported, assumed or transferred?
• What conditions remain, and what happens if I do not meet them by the funding date?
• Will the offer change if my down payment source, employment or property type changes?

If two quotes remain close, weigh the flexibility. The cost of a penalty or a lost portability option can outweigh a small difference in rate. Get answers in writing and discuss your own circumstances with a licensed professional; this article is general information only.