Refinance a $450,000 balance from 5.6% to 4.4% and you save about $11,700 over five years, even after a $9,000 penalty and $1,500 in fees. The monthly payment falls by $428. Enter your own rates and costs above to find out whether breaking your mortgage pays off.
What refinancing means
You swap the current mortgage for a new one, often before the term is over. Reasons vary, from a lower rate to a different amortization or borrowing more against the home. Leaving early usually triggers a penalty. The lower rate has to beat it.
How the calculator compares the two
The penalty and fees are added to your balance, which is how most lenders treat them. Next, the payment and interest for both mortgages are compared over the term you choose. The net saving counts everything: payments made and the balance still owed at the end. A lower payment can hide a bigger balance, so this is the fair test.
Reading the example
The new loan is $460,500, and its payment is $2,523.21 against $2,951.63 today. Over five years the new mortgage costs $94,522 in interest against $116,722. At the end, the new loan carries the higher balance, $403,630 against $389,624, because the penalty and a longer amortization were folded in. The net saving is still positive, and that is what counts.
When refinancing does not pay
A small rate drop rarely covers a big penalty, and the fees on top make it worse. Longer amortization lowers the payment but raises total interest. A loss in the result box? Try a smaller penalty or a shorter comparison period. Ask your lender, too, whether a blend and extend or an early renewal could get you a lower rate with no penalty.
Get the penalty first
Get the exact penalty from your lender, in writing. The mortgage penalty calculator estimates it for fixed and variable rates. Then add the legal and appraisal costs of the new mortgage, which many people forget until the closing papers arrive.
A quick way to test it
Change one input at a time. Just one. Lower the penalty and watch how much it eats into the saving. Shorten the comparison period to find the break-even point, meaning the month when the saving finally covers the penalty and fees. When the saving only shows up in year five, a sale or job move before then could wipe it out.
Cash-out refinancing
Some people refinance to borrow more against their home. The loan grows, so the payment falls by less than the calculator shows. Consolidating high-interest debt can still make sense, but the extra amount is repaid with interest for many years, and the total cost adds up faster than most people expect. Treat the result as a floor.
Timing the switch
Renewal is easiest. No penalty. Between renewals, watch the calendar closely, because every month changes the penalty. It shrinks as the term runs down, and a short wait can change the answer. Rerun it with the penalty your lender quotes at that time.
Other things to weigh
Expect a new stress test and appraisal. Lost value? You might not qualify for the rate you expect. Check where you stand first with the stress test calculator.
Frequently asked questions
Is refinancing worth it?
It is when the interest you save over the term is more than the penalty and fees. The net saving in the calculator shows that.
Who pays the penalty?
You do. Most lenders add it to the new mortgage, which the calculator assumes.
How much does it cost to refinance?
Expect a penalty plus legal and appraisal fees. The fees in the example are $1,500.
Does a longer amortization save money?
It lowers the payment but raises total interest. The calculator compares the balance owed at the end.
Can I refinance without a penalty?
At renewal, yes. Before that, ask about a blend and extend or an early renewal.
Do I need a new stress test?
Often yes, especially when you change lenders or borrow more.
Sources and updates
Last reviewed: . Full disclaimer. How we build calculators. Editorial policy.
Estimate only. This calculator gives general information for planning. It is not tax, legal or financial advice, and it is not affiliated with the City of Toronto, MPAC or the Canada Revenue Agency. Results depend on the numbers you enter and may differ from official amounts. Check official sources or a qualified professional before you decide.