Mortgage refinance break-even and savings calculator

It’s worth it if the interest you save over the time left in your term is more than the penalty plus the legal, appraisal, discharge and title costs of moving.

A rule of thumb about rate gaps isn’t enough in Canada. The prepayment penalty on a closed fixed mortgage often runs to five figures and can wipe out several years of savings by itself. If the net benefit over your remaining term comes out negative, waiting until maturity is almost always better, because there’s no penalty at maturity.

Up to 80% of the property’s appraised value. A refinance can’t be default-insured, so that ceiling is a rule, not a lender preference.

On a $700,000 home, the maximum mortgage is $560,000. With a $400,000 balance, that’s up to $160,000 of equity you can access, less the costs of refinancing. Costs you add to the mortgage count against the same ceiling.

The prepayment penalty is the biggest cost. On a closed fixed mortgage, it’s the greater of 3 months’ interest or an interest rate differential, and it’s often $5,000 to $15,000 or more.

You’ll also pay legal fees of roughly $1,000–$1,800, an appraisal of $300–$500 (often covered by the new lender), a discharge fee of $250–$400 from the lender you’re leaving, and title insurance of about $300. In Alberta, there’s a Land Titles registration fee on the new mortgage, but no land transfer tax.

Usually, yes, and the switch above shows both versions. Adding the costs to the mortgage keeps cash in your pocket today, but the loan is larger and the monthly saving is smaller. In the worked example, it’s $222 a month instead of $300.

Financed costs also count against the 80% ceiling, so a refinance that fits when you pay at closing can fail when you finance the costs. If that happens, the calculator tells you instead of capping the number without saying so.

Yes. A refinance is a new mortgage, so you qualify at the greater of your new contract rate plus 2 percentage points or the 5.25% minimum qualifying rate.

A straight switch at renewal is different. Since November 2024, you don’t have to re-qualify to move an uninsured mortgage, as long as you don’t increase the balance or the amortization. Provincially regulated credit unions, including Alberta ones, aren’t bound by Guideline B-20 and set their own policies.

Then there’s no break-even point, and the calculator says so instead of showing a number. That’s normal when you’re borrowing more or shortening the amortization.

The refinance can still make sense for other reasons. Accessing equity, consolidating high-interest debt or taking someone off title are all valid reasons to refinance without a lower payment. In that case, compare total interest instead of the monthly payment.

If you need equity but your current rate is good, a HELOC usually beats a refinance. It leaves your existing mortgage alone, so there’s no prepayment penalty. A standalone HELOC goes up to 65% of your home’s value, or 80% combined with your mortgage, and you pay interest only on what you draw.

The trade-off is that a HELOC has a variable rate priced above mortgage rates. If what you want is a lower rate on the whole balance, a refinance is the better fit.