Mortgage Refinance Calculator Canada

With mortgage rates fluctuating significantly over the past few years, many Canadians are wondering if refinancing makes sense. Refinancing can lower your payment, shorten your amortization, or unlock equity — but it comes with costs that must be weighed carefully. This calculator does the full analysis.

When Does Refinancing Make Sense in Canada?

Refinancing makes financial sense when:

• The rate reduction is large enough to offset the prepayment penalty within a reasonable timeframe
• You plan to stay in the home long enough to pass the break-even point
• You can access equity at a lower rate than other borrowing options
• You want to change your mortgage product (e.g., variable to fixed)

The general rule of thumb: refinancing typically makes sense if you can lower your rate by 1%+ and recoup the penalty cost within 2–3 years.

The Three-Month Interest Penalty (Variable Rate)

If you have a variable-rate mortgage, the prepayment penalty is typically 3 months of interest on the outstanding balance. Example: on a $450,000 balance at 6.2% variable rate, the 3-month penalty = $450,000 × 6.2% ÷ 4 = $6,975.

The IRD Penalty (Fixed Rate)

The Interest Rate Differential (IRD) is much more complex and can be significantly higher. It equals the difference between your current rate and the rate the bank could offer today on a new mortgage for your remaining term, applied to your outstanding balance over the remaining term.

If you have a 5-year fixed mortgage at 5.5% and rates have dropped to 4.0% with 3 years remaining, the IRD = $450,000 × (5.5% − 4.0%) × 3 years = $20,250. Get your exact penalty from your lender.