Mortgage Refinance Calculator Canada 2026

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

Key Takeaways

  • The break-even period — how long it takes for savings to offset refinancing costs — is the key decision metric.
  • Variable-rate mortgages are much cheaper to break (3 months' interest) than fixed-rate mortgages (IRD penalty).
  • You can refinance up to 80% LTV in Canada; above that requires CMHC insurance.
  • If your renewal is approaching, waiting to renew is almost always better than paying a penalty to refinance.

Mortgage Refinance Calculator for Canadian Homeowners

Refinancing your mortgage means replacing your existing mortgage with a new one — typically to take advantage of a lower interest rate, change your amortization period, or access your home equity. In Canada, refinancing can save you thousands of dollars over the life of your mortgage, but it also comes with costs that need to be weighed carefully against the potential savings.

The decision to refinance is not straightforward. You need to factor in prepayment penalties from your current lender, potential legal and appraisal fees, and whether the new rate and terms justify breaking your existing contract. This calculator helps you compare your current mortgage against a refinanced scenario so you can make an informed decision.

How It Works

This calculator compares your current mortgage (remaining balance, rate, and term) against a new refinanced mortgage at a different rate or amortization. It calculates the total interest cost under both scenarios, accounts for any prepayment penalty you would incur for breaking your current mortgage early, and shows the net savings or cost of refinancing over your chosen time horizon.

Enter your current mortgage details — remaining balance, interest rate, remaining amortization, and how far you are into your current term. Then enter the proposed new rate and amortization. The calculator computes the Interest Rate Differential (IRD) or three months' interest penalty (whichever your lender would charge), adds it to the refinancing costs, and determines how many months it takes to break even on the switch.

Understanding Refinancing Costs in Canada

Refinancing involves several costs beyond the prepayment penalty. Legal fees for discharging your current mortgage and registering the new one typically run $500-$1,500. An appraisal fee of $300-$500 may be required. Your new lender may cover some or all of these costs as an incentive, but factor them into your total cost analysis.

The prepayment penalty is usually the largest cost. For variable-rate mortgages, it's a straightforward 3 months' interest. For fixed-rate mortgages, the Interest Rate Differential (IRD) can be tens of thousands of dollars if rates have dropped since you locked in. Always get a written penalty quote from your lender before making a decision.

Blend-and-Extend as an Alternative

Some lenders offer a blend-and-extend option that avoids the full prepayment penalty. Your current rate is blended with the new rate for a new term, resulting in a rate somewhere between the two. While you don't get the full benefit of the lower rate, you avoid the penalty entirely.

This option is most attractive when the penalty is large (fixed-rate with significant IRD) and the rate difference is moderate. It's less useful when the rate drop is dramatic — in that case, paying the penalty and getting the full lower rate may produce better long-term savings. Compare both scenarios carefully using total cost over the new term.

Key Facts

  • Canadian prepayment penalties are typically the greater of three months' interest or the Interest Rate Differential (IRD). The IRD is usually the larger penalty on fixed-rate mortgages when rates have dropped.
  • You can refinance up to 80% of your home's appraised value in Canada. If your new mortgage exceeds 80% LTV, CMHC mortgage insurance is required.
  • Refinancing costs in Canada typically include a prepayment penalty ($2,000-$20,000+), legal fees ($500-$1,500), appraisal fee ($300-$500), and discharge/registration fees.
  • Variable-rate mortgages in Canada generally carry a simpler penalty of three months' interest, making them less expensive to break than fixed-rate mortgages.
  • Some lenders offer a "blend-and-extend" option that blends your current rate with the new rate for a new term, avoiding the full prepayment penalty.
  • The break-even period — how long it takes for monthly savings to offset refinancing costs — is the key metric. If you plan to sell before the break-even point, refinancing may not be worthwhile.

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. Use this calculator to compare the total cost of both scenarios. 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. Always request a penalty quote from your lender before deciding.

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.

Updated March 2026. Information on this page is provided for educational purposes only. Tax rules, rates, and government programs may change — verify details with the CRA or a qualified financial advisor.