Mortgage Refinance Calculator

Refinancing gets sold as simply swapping a high rate for a low one. It rarely is. If you’re still inside your term, breaking the current mortgage triggers the same prepayment penalty as breaking it to sell — the greater of three months' interest and the interest rate differential. And refinancing almost always resets your amortization back up, which can make the total interest bill bigger even while the monthly payment gets smaller. This calculator prices both effects together, so the decision is made on the real numbers instead of the rate alone.

What this calculator answers

It prices the full cost of refinancing mid-term: the prepayment penalty, closing costs, the new payment against the old one, and — the number that actually matters — how many months of savings it takes to earn back what refinancing cost you upfront. It also compares total interest on the old schedule against the new one, since a smaller payment on a longer amortization can quietly cost more over time.

What it deliberately does not cover

This estimates the standard penalty formula and a simplified payment/interest comparison — it doesn’t use your lender’s exact posted-rate discount math, which usually makes the real penalty somewhat higher than shown here. It doesn’t model a switch at renewal with no penalty (see the Renewal Shock calculator for that scenario instead), and it doesn’t account for any tax effect of what you do with cash-out funds. And it can’t tell you whether refinancing is the right call for your situation — only what it costs and when it starts paying off.

Every input, explained

Current mortgage balance. What you owe today, before any cash-out — from your most recent statement, not your original loan amount.

Your current contract rate. The actual rate you’re paying now, not a posted rate.

Months left in current term. How many months until your term would end on its own without breaking anything. This drives the penalty — a longer stretch remaining generally means a bigger interest rate differential.

Years left on current amortization. How many years it would take to pay off your mortgage at your current payment, if you changed nothing. This sets your "current payment" for comparison.

New (refinance) rate. The rate you’d get by refinancing now — get this from an actual lender quote, since it also stands in for the "current market rate" the penalty formula compares your contract rate against.

New amortization. What your new lender is actually offering, which is very often reset back up toward 25 or 30 years rather than carrying forward the years you had left. Check your actual offer — don’t assume it matches your old schedule.

Cash you want to take out. Extra money borrowed on top of your current balance, if any. A cash-out refinance is capped at 80% of your home’s appraised value minus what you still owe, since refinances are always uninsured mortgages — leave this at $0 for a rate-only refinance.

Refinance closing costs. Legal fees ($700–$2,000, sometimes covered by the new lender on larger mortgages), an appraisal ($300–$600), and a discharge fee if you’re leaving your current lender ($200–$500) typically add up to $1,000–$3,000 combined.

How the math works

The penalty is identical to the Breaking Your Mortgage calculator's formula: three months' interest is balance × contract rate ÷ 4; the interest rate differential is the rate gap between your contract rate and the new rate, times the balance, times the years left in the term. The lender charges whichever is larger. That penalty, plus your closing costs, is the total upfront cost of refinancing.

The new payment is calculated on your current balance plus any cash-out, at the new rate, over the new amortization — using the same semi-annual-compounding formula every calculator on this site uses. The gap between that and your current payment is the monthly saving (or increase, if you’re borrowing a lot more). Divide the upfront cost by the monthly saving and you get the break-even month: the point where the switch has paid for itself and every month after is real savings.

Worked example: breaking a $450,000 mortgage for a lower rate

A borrower has a $450,000 balance at 5.75%, with 24 months left in the term and 22 years left on the amortization. A new lender offers 4.49%, resetting the amortization to 25 years, with no cash-out and $1,800 in closing costs.

Penalty: three months' interest is $450,000 × 5.75% ÷ 4 = $6,469. The interest rate differential is (5.75% − 4.49%) × $450,000 × (24/12) = $11,340. The IRD is larger, so that’s the penalty. Total upfront cost: $11,340 + $1,800 = $13,140.

Payments: the current payment on $450,000 at 5.75% over 22 years is about $2,990/month. The new payment on the same $450,000 at 4.49% over 25 years is about $2,488/month — a saving of roughly $502/month.

Break-even: $13,140 ÷ $502 ≈ 26 months, a little over 2 years, before the switch has paid for itself.

The catch: comparing total interest over the same 22-year window, the old mortgage costs about $339,300 in interest and the new one about $290,600 — a real win here, because the new amortization (25 years) is close to what was left (22 years). Stretch the new amortization further past what you had left, and that comparison can flip: the total-interest lines in the calculator above show exactly where that happens for your own numbers.

Provincial quirks and edge cases

The penalty and payment math are the same everywhere — mortgage contracts aren’t provincially regulated. Quebec is the one genuine wrinkle: many mortgages there are structured as hypothecs rather than conventional charges, which can change discharge and registration costs at payout — ask your notary for the exact figure rather than assuming the same closing-cost range applies. Everywhere, using an unused annual prepayment privilege before you refinance shrinks the balance the penalty is calculated on, and porting your mortgage to a new property (if you’re moving) can avoid the penalty entirely if the lender allows it and the timing lines up. Ask about blend-and-extend too — folding your old rate into a new term with the same lender is sometimes cheaper than breaking outright.

Questions to ask a professional

Lender or mortgage broker: What is my exact penalty today, and does it match the three-months/IRD estimate here or run higher?
Lender or mortgage broker: What amortization are you actually offering me — carried forward, or reset to 25/30 years?
Mortgage broker: Would blend-and-extend or porting cost less than breaking and refinancing outright?
Financial planner: Does taking cash out now change my longer-term retirement or investment plan?

Frequently asked questions

Is refinancing the same as renewing?

No. A renewal happens at the natural end of your term, with no penalty, and carries forward whatever amortization you have left. A refinance breaks your mortgage before term end (triggering a penalty) or changes its structure — borrowing more, extending amortization — and is always an uninsured mortgage capped at 80% loan-to-value.

Why does my payment go down but the total interest go up?

Refinancing usually resets your amortization back up to 25 or 30 years, even if you only had 15 or 20 left. A longer schedule lowers the monthly payment but spreads interest over more years — often more total interest than finishing your current mortgage on its original timeline, even at a lower rate.

How much can I borrow with a cash-out refinance?

Up to 80% of your home’s current appraised value, minus what you still owe. A refinance is always uninsured, so CMHC’s higher loan-to-value tiers for insured purchases do not apply here.

Is the penalty the same as breaking my mortgage to sell?

The penalty math is identical — the greater of three months’ interest and the interest rate differential. The difference is what happens next: a sale ends the borrowing, a refinance replaces it with a new loan, often on a new amortization schedule.

Does refinancing require a new appraisal?

Usually yes, especially for a cash-out refinance, since the lender needs today’s value to calculate your 80% loan-to-value limit. Budget roughly $300–$600 for it as part of your closing costs.

Rules and rates as of September 2026. This is general information for Canadian home buyers and sellers, not financial, legal, or tax advice. Rules and rates change; confirm current figures with your lawyer or notary, your lender, or the government office that administers the tax before relying on them.