UtilibyWritten by the Utiliby editorial team · Last updated October 15, 2026 · Rules and formulas reviewed October 2026
What this free online Canadian mortgage refinance calculator does
Refinancing a Canadian mortgage is rarely free. If you break a fixed-rate mortgage before the end of its term, you pay a prepayment penalty, and the penalty can be many thousands of dollars. This free online mortgage refinance calculator for Canada estimates that penalty, adds the other costs of refinancing, and shows whether the lower rate repays them.
It follows Canadian conventions: fixed rates compound semi-annually, the penalty is the greater of three months of interest and the interest rate differential, and amounts are in Canadian dollars. The results give the new payment, the monthly saving, the break-even month and the lifetime interest saved, and the Wait tab compares breaking now with waiting for the end of your term. Everything runs in your browser, so your figures stay private.
How to use the Canadian refinance calculator
- Enter your current mortgage. Use the balance, the rate, the amortization left and whether the rate is fixed or variable.
- Add your term and comparison rate. Enter the months left in your term and the lender's rate for a term of that length, which drives the interest rate differential.
- Enter the new mortgage. Add the rate, rate type, amortization, fees and any cashback.
- Choose how to pay the costs. Pay up front or add them to the mortgage.
- Read the results. Compare the break-even with how long you will keep the new mortgage, and open the Wait tab.
How the prepayment penalty works
On a variable-rate mortgage the penalty is normally three months of interest. On a balance of 400,000 at 5.2%, three months of interest is about 5,200. On a fixed-rate mortgage the lender takes the greater of that and the interest rate differential. The differential is roughly the balance multiplied by the gap between your rate and a comparison rate, multiplied by the years left in your term. With a 0.8-point gap and two years left, that is about 6,400, so the penalty would be the larger figure.
This is a simple version of the formula. Some lenders compare against their posted rates rather than the rate they would offer you today, which can make the penalty much higher, particularly for the big banks. That is why it is worth asking for a written penalty figure, and why a mortgage with a low penalty can be worth a slightly higher rate.
Worked example
A homeowner owes 400,000 at a fixed 5.2% with 22 years of amortization left and 24 months left in the term. The lender's rate for a two-year term is 4.4%, so the differential penalty is about 6,400, above the 5,200 of three months of interest. A new 4.6% fixed mortgage with 1,200 of legal and appraisal fees and 300 of discharge fees costs about 7,900 in total to arrange. The payment falls by about 130 a month. The break-even is about five years, so for someone who expects to stay five years, breaking the mortgage is roughly neutral. Waiting the 24 months for the term to end avoids the penalty and is better. The calculator shows the exact figures for your numbers.
Alternatives to breaking your mortgage
- Wait for renewal. There is normally no penalty at the end of the term.
- Blend and extend. Your lender blends your old rate with the current one.
- Use your prepayment privileges. Many mortgages allow lump sums and higher payments each year without a penalty.
- Port the mortgage. If you are moving, you may be able to take the mortgage with you.
- Negotiate. Ask your lender whether it will lower the penalty or match a competing offer.
Tips for a better refinance
- Get the penalty in writing, with the method and the comparison rate.
- Compare lenders on the total cost, not only the rate.
- Check whether the lender covers legal or appraisal fees.
- Choose a mortgage with a reasonable penalty method if you may need to break it.
- Think about the amortization. Extending it lowers the payment but raises interest.
Terms, amortization and the renewal date
A Canadian mortgage has two clocks. The term is the period, often five years, for which your rate and conditions are fixed. The amortization is the full time, often 25 years, over which you would repay the loan. The prepayment penalty depends on your term, because that is the contract you would break. At the end of the term you renew, and that is the cheapest moment to change lenders or terms, since there is no penalty.
This is why timing matters so much. If your term ends in a few months, the amount you could save by breaking early is small, while the penalty can be large. If it ends in several years and rates have fallen sharply, breaking may pay. The Wait tab compares the two. Also remember that the new mortgage starts a new term, which carries its own penalty if you break it, so a mortgage with a flexible penalty can be worth more than a slightly lower rate.
Rates are quoted differently for fixed and variable mortgages. Fixed rates compound semi-annually, variable rates monthly, and the calculator converts so the payment matches what a lender would give you. If you are comparing a fixed and a variable offer, remember that the variable rate can move during the term.
Common mistakes
- Assuming the penalty is three months' interest on a fixed rate.
- Ignoring the other costs.
- Using the example comparison rate.
- Not counting the move. If you will sell soon, the break-even may not matter.
- Refinancing for a small rate cut.
Related refinance tools and guides
This calculator is one of a set of free refinance tools on Utiliby. Depending on what you are deciding, these may help next.
- Remortgage Calculator UK: the version for another country.
- Home Loan Refinance Calculator (Australia): the version for another country.
- Home Loan Refinance Calculator India: the version for another country.
- Mortgage Refinance Calculator: the US version, with a full savings view.
- Refinance Break-Even Calculator: payback month.
For background reading:
Privacy, accuracy and limits
The calculator runs entirely in your browser. The figures you enter are not sent to a server and are not stored, and reloading the page returns the example. The default rates and fees are illustrations. The penalty is an estimate, mortgage insurance and property taxes are not included, and a lender decides whether to approve a refinance. Confirm every number with your lender before you decide.
Frequently asked questions
How much does it cost to break a mortgage in Canada?
For a variable-rate mortgage the penalty is usually three months of interest. For a fixed-rate mortgage it is generally the greater of three months of interest and the interest rate differential, which can be much larger. Your lender must be able to tell you the exact amount.
What is the interest rate differential (IRD)?
It is a way of estimating the interest your lender loses when you leave a fixed-rate term early. A common version multiplies your balance by the gap between your rate and a comparison rate, by the time left in your term. Lenders choose different comparison rates, so the result varies.
Why does the calculator ask for the lender's rate for the remaining term?
The IRD depends on a comparison rate, usually what the lender charges today for a term close to the time you have left. Enter the figure your lender gives, or an estimate, and the tool calculates the penalty from it.
Is the penalty the greater of three months' interest or the IRD?
For most closed fixed-rate mortgages, yes, and the calculator uses the greater of the two. Some lenders calculate the IRD from posted rates, which can raise it. Always ask for your penalty in writing.
How does a refinance differ from switching lenders at renewal?
A refinance replaces your mortgage before the term ends, often to change the rate, the amortization or to borrow more, and it can trigger a penalty. At renewal there is usually no penalty, because the term has ended.
When is breaking my mortgage worth it?
When the monthly saving, or the interest saved, repays the penalty and fees within the time you will keep the new mortgage. The break-even month and the Wait tab give a quick answer.
Should I wait until my term ends?
If the term is close to ending, waiting avoids the penalty, but you keep paying the old rate until then. The Wait tab compares the two paths in dollars.
What is a blend-and-extend?
Some lenders offer to blend your current rate with a new rate and extend the term, instead of charging a penalty. It can avoid a big payment, but the blended rate may be higher than the best market rate, so compare it with other offers.
How are Canadian mortgage rates compounded?
Fixed rates compound semi-annually by law, while variable rates normally compound monthly. This calculator converts a fixed rate into the monthly equivalent so your payment matches what a lender would quote.
What fees apply when I refinance?
Typical costs are legal fees, an appraisal, title insurance, and a discharge or administration fee from your old lender, plus the prepayment penalty. Some lenders cover some costs. Enter what you were quoted.
Can I add the penalty to the new mortgage?
Often yes. It avoids a cash payment but you pay interest on it for the new amortization. Choose that option in the calculator to see how it changes the break-even.
Does a longer amortization save money?
It lowers the payment, but you pay interest for longer. Check the lifetime interest figure before you extend the amortization.
Can I use the tool for a home equity line or second mortgage?
This calculator compares one mortgage with another on the same balance. A second mortgage or line of credit works differently, so compare it with the refinance separately.
How accurate are the default figures?
They are examples only. Replace every field with the figures from your mortgage statement and a written penalty quote.
Is my information private?
Yes. The calculator runs in your browser. Nothing you enter is sent to a server, saved or shared, and reloading the page resets it.
Does it work for insured mortgages?
It compares payments and costs, but insured mortgages and limits on refinancing follow separate rules. Ask your lender about eligibility.
Is this Canadian refinance calculator free?
Yes. It is a free online calculator with no sign-up, trial or limit. You can print or download the results.
Sources and further reading
- Financial Consumer Agency of Canada, "Prepaying your mortgage" and "Mortgage prepayment penalties" (canada.ca/en/financial-consumer-agency).
- Financial Consumer Agency of Canada, "Mortgage renewal and refinancing" (canada.ca/en/financial-consumer-agency).
- Government of Canada, Interest Act, on the calculation of interest on mortgages (laws-lois.justice.gc.ca).
- Canada Mortgage and Housing Corporation, home-buying and mortgage guidance (cmhc-schl.gc.ca).
Sources were consulted in October 2026. Standards and rules can change, so always check the official page for your situation.