Refinance savings calculator
Compare your current mortgage vs a new lower rate — including any prepayment penalty (IRD) and refinance closing costs. Find your breakeven.
Your scenario
Result
Estimate — your lender will compute the exact penalty using your contract's IRD method.
How refinance savings math works
Refinancing a Canadian mortgage trades a one-time cost — your prepayment penalty plus closing costs (legal, appraisal, title insurance, possibly discharge fee) — for ongoing monthly savings at the new rate. The break-even month is when accumulated savings finally cover the upfront cost.
When refinancing pays off
The classic rule: if your remaining term is at least 12-24 months past breakeven and your new rate is 50+ bps lower than your current rate, refinancing usually wins. The math is sensitive to three variables:
- Rate spread. The bigger the drop, the faster you break even.
- Mortgage balance. A 50 bps drop on $200k saves much less than the same drop on $700k.
- Remaining term. Refinancing 6 months before renewal rarely covers the penalty; refinancing 4 years out usually does.
The two IRD methods
Fixed-rate Canadian mortgages use the GREATER of 3-month interest or Interest Rate Differential (IRD). Two methods dominate:
- Posted-rate IRD (big-bank style) — RBC, TD, Scotia, BMO, CIBC. Uses posted rates and tends to produce large penalties.
- Discounted-rate IRD (monoline / broker) — First National, MCAP, Merix, Equitable. Uses actual rates and typically produces smaller penalties.
This calculator uses the discounted-rate method by default — a reasonable proxy that fits most broker-channel mortgages. For an exact quote, get a written payoff statement from your lender. Read the full breakdown in our IRD penalty methods explainer or run an exact penalty in the breaking mortgage penalty calculator.
Worked example
Mortgage balance $540,000 at 5.84% with 30 months left in a 5-year term, refinancing to 4.49%:
- Monthly savings: ~$420/month
- Total savings over 30 months: ~$12,600
- Estimated penalty (discounted IRD): ~$4,500
- Refi closing costs: ~$2,000
- Net savings: ~$6,100
- Breakeven: ~16 months in
What this calculator does NOT include
- Discharge fees (typically $200-$400 if leaving your current lender)
- Re-qualification under the federal stress test (switching lenders triggers it)
- Lost prepayment privileges if you're mid-term
- Appraisal fee if required ($300-$500)
Common questions
Should I refinance to consolidate high-interest debt?
Often yes — even with a penalty, rolling 20%+ credit card debt into a 5% mortgage typically saves thousands per year. Run the math in the debt consolidation refinance calculator.
Should I refinance to extend my amortization?
Only if cash flow is genuinely tight. Extending lowers the payment but adds tens of thousands in lifetime interest. Better path: keep the amortization and look for genuine rate savings.
Can I refinance with my current lender?
Yes — same-lender refis sometimes get the penalty waived or reduced. Always ask. And if they say no, get a quote from a broker before walking away.