Mortgage Refinance Calculator

When Does Refinancing a Mortgage Make Sense in Canada?

Refinancing replaces your existing mortgage with a new one, typically at a lower interest rate or with different terms. In Canada, most fixed-rate mortgages carry a prepayment penalty equal to the greater of three months’ interest or the Interest Rate Differential (IRD). Variable-rate mortgages usually incur only the three-month interest penalty, making them significantly cheaper to break. Before refinancing, you must confirm that the long-term interest savings exceed the penalty, any legal and appraisal fees (typically $1,000–$2,500), and the discharge fee charged by your current lender.

A blend-and-extend is an alternative offered by many Canadian lenders. Instead of breaking the mortgage and paying a penalty, the lender blends your current rate with a new rate for an extended term. This avoids the upfront penalty but may result in a higher blended rate than a full refinance. It is most useful when you are close to renewal or when penalties are prohibitively high.

Typical Refinance Costs in Canada

As a general rule, refinancing is worthwhile when the rate reduction is at least 0.5% to 1.0% and you plan to keep the mortgage long enough to pass the break-even point. If your renewal date is within 12 months, waiting and negotiating a new rate at renewal is often the better path—especially since many lenders will match competitor offers to retain your business.