Mortgage Refinance Calculator (Canada)
Last updated
Estimate the break-even point for refinancing a Canadian mortgage. Composes the prepayment penalty, new monthly payment at the refinanced rate, and closing costs (legal, appraisal, title insurance) into a single break-even-in-months number. Output is a number, not a recommendation — refinancing decisions involve more than break-even (term flexibility, prepayment privileges, mid-term life changes).
Refinancing replaces an existing mortgage with a new one — usually to get a lower rate, take cash out, or both. The math on whether it makes sense centres on a single number: how many months of lower payments are needed to recover the upfront cost.
The calculator composes three pieces:
- Prepayment penalty — the largest cost. Greater of 3 months' interest or the IRD for fixed-rate mortgages; 3 months' interest for variable.
- Closing costs — legal, appraisal, title insurance, discharge fees. Usually $2,000–$3,000 total.
- New mortgage payment — at the refinanced rate, computed with Canadian semi-annual compounding.
Output: total cost of refinancing, monthly savings, and the break-even point in months. The calculator does not rate the decision — many considerations beyond pure savings matter (mid-term renewal flexibility, prepayment privileges, expected rate moves before your current term renews).
How this calculator works
monthly_savings = old_monthly_payment − new_monthly_payment
total_cost = penalty + legal + appraisal + title + other
break_even_months = ceiling(total_cost ÷ monthly_savings) when savings are positive. Infinity if the new payment is higher.
Mortgage payments use Canadian semi-annual compounding ( see Mortgage Payment). Penalty math: Mortgage Penalty.
Source: FCAC — Refinancing your mortgage.
Worked example
$400,000 balance, 22 years amortization remaining, current rate 5.49% fixed, 24 months left in term, comparison rate 4.29%, refinancing to 4.29% with a new 25-year amortization. Closing costs $2,200 (default).
- Penalty (IRD): (5.49% − 4.29%) × $400,000 × 24/12 =
$9,600 - Closing costs: $1,500 + $400 + $300 + $0 =
$2,200 - Total refinancing cost:
$11,800 - Old monthly payment:
~$2,597(5.49% over 22 yrs, semi-annual compounding) - New monthly payment:
~$2,168(4.29% over 25 yrs) - Monthly savings:
~$429 - Break-even:
ceiling($11,800 ÷ $429) ≈ 28 months
Run the calculator above for the precise numbers. The 28-month break-even means refinancing makes economic sense if you expect to hold the new mortgage at least that long, and you don't expect rates to fall meaningfully further before your current term renews in 24 months.
Frequently asked questions
What does 'break-even' actually mean here?
The number of months until the cumulative monthly savings from the lower rate equal the upfront cost of refinancing (penalty + legal + appraisal + title + other fees). After that point, every additional month at the lower rate is net savings. Common rule of thumb: refinancing makes sense if you expect to keep the mortgage longer than the break-even AND you expect rates not to drop further before your current term renews. The calculator shows the number; you decide whether your circumstances support the timing.
Why is the penalty often the biggest line item?
On a $400K balance with 24 months left at 5.5%, the IRD penalty alone can be $8,000–$15,000+ depending on the comparison rate convention. Legal ($1,500), appraisal ($400), title insurance ($300) combined are usually under $2,500. The penalty drives whether refinancing is economically viable; the other fees are noise by comparison. If you're within 6 months of your renewal date, the penalty drops to near zero and refinancing math improves dramatically — sometimes worth waiting for.
Should I extend my amortization when refinancing?
Extending lowers the monthly payment but adds total interest. The calculator shows both numbers. A common pattern: take cash out via refinance for renovations / debt consolidation by stretching amortization back to 25 or 30 years; this only makes sense if the new debt is going to a higher-return use than the additional interest cost. Keeping the original amortization is the textbook choice if your only goal is rate-driven savings.
What's NOT in this calculator?
Property tax adjustment, insurance differences if you change lenders, the time value of money over the break-even horizon (small effect at typical rates), tax deductibility of mortgage interest if you have a rental portion (rare for primary residences in Canada), and any prepayment privileges you'd lose. Also: this calculator assumes you keep paying monthly. Switching to bi-weekly accelerated alongside refinancing produces additional savings the calculator doesn't model — use the Mortgage Payment calculator for that.
Sources
Every figure on this page traces back to a primary Canadian authority. See the complete sources index for the master list.
Verified against FCAC refinancing guidance, RBC/TD/BMO refinance illustrations on .
Important
This calculator is for informational purposes only. It is not financial, tax, mortgage, or legal advice. Tax rates, mortgage rules, and contribution limits change. Always verify current rules with the relevant Canadian authority and consult a licensed professional before making financial decisions.