Prospective homebuyer Mike Bell thought he had the perfect plan: Wait for house prices to drop and move in.

"We looked and thought 'time to sell now' -- take some equity out and hopefully buy a larger house in the future when prices are lower," he told CTV.

But Bell only got his five-year mortgage six months ago, and he knew he'd face a penalty if he left.

"People out there think it's a three month penalty if you break a fixed-term mortgage."

But with falling interest rates, he didn't know his penalty was going to skyrocket. He got was a nasty surprise -- an over $16,000 surprise.

"When you see it at the end you think 'wow, what happened?'" he says.

Mike got the higher penalty because of one clause in the mortgage contract which states you pay a three month interest penalty or something called interest rate differential.

What that means is you pay the bank the difference between your higher mortgage rate and today's lower rate times what you owe -- times the remaining years on your mortgage.

(Your rate minus today's rate times what you owe times years left)

For example, if your mortgage rate is six per cent and today's rate is four per cent, that two per cent difference is multiplied by what you owe -- say $300,000 times the number of years remaining. Say that was four years you'd be left with a penalty of $24,000.

(6 % minus 4% = 2%  times  $300,000 times four years = $24,000 penalty)

"I worked it out," says Bell. "It's one full year's interest on the principle is our penalty -- one full year's interest."

Doug Melville is the deputy ombudsman responsible for banking services.

"Right now, it's IRD that is causing everyone the heartburn because it's now -- in some cases - it's five, six, seven times your three months interest people are expecting to pay."

Related: Calculate the penalty for breaking your mortgage

It's happening everywhere.

"Normally in our caseload each year, we'll see maybe a dozen a year of these types of cases. I've seen a dozen in the last two weeks."

Mike Bell says he would have changed his tune if he knew about the penalty ahead of time.

"Had we known this kind of penalty was potentially there, we would have tried to build it into our selling price."

Bell noted another clause in his mortgage that said he could get the money back if he got another mortgage with CIBC within 90 days. After CTV contracted the bank, it agreed to extend that time to a year.

"It's a win-win right?" says Mike. "In the end of the day they get us back."

It's important to read your individual mortgage documents very carefully. The rules may be different and you don't want to make an expensive mistake.

With a report from CTV British Columbia's Chris Olsen