Mortgage Refinance Calculator Canada 2026

Should you refinance your mortgage? Compare current vs new payments, calculate prepayment penalty, and see your breakeven timeline.

FAQ

When does it make sense to refinance my mortgage in Canada?

Refinancing typically makes sense when the interest savings over your remaining term exceed the total cost of breaking your mortgage (penalty + fees). A common rule of thumb is that a rate reduction of at least 0.50%-1.00% can justify refinancing, but the actual math depends on your balance, penalty type, and how long you plan to stay in the home — if you plan to sell before the break-even point, refinancing may not be worthwhile. Also consider refinancing if you need to consolidate high-interest debt, access equity for renovations, or restructure your amortization.

How is the prepayment penalty calculated in Canada?

For fixed-rate mortgages, most Canadian lenders charge the greater of three months' interest or the Interest Rate Differential (IRD). The IRD compares your contract rate against the lender's current rate for a term matching your remaining term, applied to your outstanding balance. Each lender calculates IRD slightly differently — some use posted rates, others use discounted rates — which can dramatically affect the penalty amount. Variable-rate mortgages almost always use the simpler three months' interest calculation, making them less expensive to break.

Can I refinance if I have less than 20% equity?

In Canada, you can only refinance up to 80% of your home's current appraised value without CMHC insurance. If your equity is below 20%, you would need to add CMHC mortgage insurance to the new mortgage, which adds a premium of 2.80%-4.00% of the mortgage amount. In many cases, this additional cost makes refinancing uneconomical unless rates have dropped substantially. Alternatively, you could make a lump-sum payment to bring your equity above 20% before refinancing.

What is the difference between refinancing and renewing?

Renewal happens at the end of your mortgage term (typically every 3-5 years in Canada) and allows you to renegotiate your rate and term with your current lender or switch to a new one without penalty. Refinancing means breaking your mortgage before the term ends, which triggers a prepayment penalty. You can also change the mortgage amount when refinancing (borrow more against your equity), which you generally cannot do at renewal. If your term is ending soon, it's almost always better to wait and renew rather than refinance and pay a penalty.

How does this calculator work?

Enter your current mortgage details — remaining balance, interest rate, remaining amortization, and how far you are into your current term — then the proposed new rate and amortization. The calculator computes the Interest Rate Differential (IRD) or three months' interest penalty (whichever your lender would charge) and adds it to refinancing costs such as legal fees ($500-$1,500) and appraisal fees ($300-$500). It then compares the total interest cost under both scenarios and determines how many months it takes to break even on the switch.