Refinancing a $450,000 mortgage from 5.6% to 4.4% nets you $11,700 over five years, after a $9,000 penalty and $1,500 of fees. Put in your own rates, penalty and fees below and see whether a switch pays for you.
What does a refinance cost?
Breaking a mortgage early usually means a penalty, and a new loan brings legal and appraisal fees. This tool rolls both into the new loan, which means they collect interest too. It then compares the two paths over three or five years, counting the payments you make and the balance you still owe at the end. That second part matters, because a smaller payment can sit on top of a bigger debt.
Keep or refinance, side by side
The table shows the default inputs and what each path produces. Keeping the mortgage means the old rate and payment carry on. Refinancing swaps in a new loan with the penalty and fees inside it.
| Item | Keep the mortgage | Refinance |
|---|---|---|
| Loan | $450,000 | $460,500 |
| Rate | 5.6% | 4.4% |
| Amortization | 22 years left | 25 years |
| Monthly payment | $2,951.63 | $2,523.21 |
| Interest over 5 years | $116,722 | $94,522 |
| Balance after 5 years | $389,624 | $403,630 |
Is the lower payment the whole story?
No, and this is where people get carried away. You owe $450,000. Add the $9,000 penalty and $1,500 in fees and the new loan is $460,500. The payment falls by $428.43 a month, from $2,951.63 to $2,523.21.
But the lower rate isn’t the only reason the payment drops, because part of it comes from stretching the amortization from 22 to 25 years, and that stretch is exactly what leaves you owing more at the end. After five years the new loan sits at $403,630, which is $14,006 above the $389,624 you’d owe if you kept the old one. The net saving of $11,700 already takes that gap into account, along with $22,200 less interest.
Now try a new rate of 5.4%. The payment falls by only $167.53, and the result flips to an extra cost of $10,418. A small rate cut rarely pays for a penalty that size, and you can see it happen here. Keep testing rates and penalties until you find the break-even for your own case.
What can go wrong with a refinance?
Guessing the penalty is the big one. Get a written figure from your lender, since your contract sets it. The tool doesn’t calculate it for you; you type it in. Both rates are held fixed and only a short window is compared, so a rate that moves later isn’t captured. Pulling equity out of your home is a different question, and this page doesn’t answer it.
Judge the switch by the net saving, and ignore the lower payment when you do. Also ask the new lender about other costs. Whatever you turn up goes in the fees box. That keeps the result honest, and it’s the step people skip when they’re excited about a lower rate they’ve been offered.
To estimate the charge itself, use the mortgage penalty calculator. If your term is ending anyway, the mortgage renewal calculator sidesteps the penalty question. Borrowing against your home instead is what the HELOC calculator covers, and the amortization schedule shows how a new term changes your balance.
Where do the numbers come from?
The maths is a standard loan schedule with semi-annual compounding, the way Canadian fixed-rate mortgages work. The Financial Consumer Agency of Canada publishes guidance on breaking a mortgage contract. We couldn’t confirm the exact penalty rules, so you’ll want to rely on your contract. This website has no connection with any lender or government body.
Frequently asked questions
How much can a refinance save?
In the default case, moving from 5.6% to 4.4% saves $11,700 over five years after a $9,000 penalty and $1,500 in fees.
Why does the payment drop by $428.43?
Two things: the rate falls, and the amortization stretches from 22 to 25 years. Both lower the payment.
What happens if the new rate is only 5.4%?
The default case then costs $10,418 more over five years, since the penalty outweighs the small rate cut.
Does the tool work out my penalty?
No. You enter the figure your lender gives you, and it's added to the new loan.
Why look at the balance at the end?
A longer amortization leaves a bigger balance behind. Here it's $403,630 against $389,624.
Sources and updates
Updated: . How we check rates · Editorial team · Updates
Estimate only. These figures are a planning estimate, not tax, legal or accounting advice. Tax-Services.ca is an independent publisher: we don't prepare or file tax returns, and we don't offer tax, legal or accounting services. We have no connection with the Canada Revenue Agency, Revenu Québec or any provincial government. Your real amounts depend on details this tool cannot see, so confirm them with an official source or a qualified professional before you act.