# Should You Refinance Your Mortgage? Find Out

> Compare your current mortgage with a refinance after the penalty and fees, and see the net saving or extra cost over three or five years

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.

The Financial Consumer Agency of Canada tells borrowers to [find out about the prepayment penalty and other costs](https://www.canada.ca/en/financial-consumer-agency/services/mortgages/break-mortgage-contract.html) before breaking a mortgage contract, and that advice is worth following to the letter here.

## 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.

## Should I wait for renewal instead?

Often, yes. If your term ends within a few months, waiting can cost you nothing in penalty, and a lender who wants to keep you may match a better rate. Picture Dave in Regina, nine months from renewal with a rate he doesn't love. A penalty in the thousands to save a few bucks a month for nine months makes little sense, while shopping the renewal costs only some phone calls.

The calculator can help with that call too. Try a much smaller penalty and lighter fees in the boxes above to see what a switch near renewal might be worth.

## Where to go next

To estimate the charge itself, use the [mortgage penalty calculator](https://tax-services.ca/calculators/mortgage/mortgage-penalty). If your term is ending anyway, the [mortgage renewal calculator](https://tax-services.ca/calculators/mortgage/mortgage-renewal) sidesteps the penalty question. Borrowing against your home instead is what the [HELOC calculator](https://tax-services.ca/calculators/mortgage/heloc-calculator) covers, and the [amortization schedule](https://tax-services.ca/calculators/mortgage/mortgage-amortization) shows how a new term changes your balance.

## Where this information comes from

The maths is a standard loan schedule with semi-annual compounding, the way Canadian fixed-rate mortgages work. Your contract, not this page, decides the real penalty. This website has no connection with any lender or government body.

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Source: https://tax-services.ca/calculators/mortgage/mortgage-refinance
Last updated: 2026-10-06
Independent information site. Not affiliated with the CRA. No services, no guarantee of accuracy. See https://tax-services.ca/disclaimer