Mortgage Refinance Calculator

When Should You Refinance Your Mortgage?

Mortgage refinancing involves replacing your current mortgage with a new one, typically to take advantage of lower interest rates or better terms. However, refinancing isn't always the right choice. Here are key factors to consider:

Interest Rate Difference

As a general rule, refinancing makes financial sense when you can lower your interest rate by at least 0.5% to 1%. Smaller rate differences may not justify the closing costs associated with refinancing. Use this calculator to determine your specific break-even point.

How Long You Plan to Stay

The break-even period is critical. If your closing costs are $3,000 and you save $150/month, you'll break even in 20 months. If you plan to sell or move before reaching the break-even point, refinancing may not be worthwhile. Generally, you should plan to stay in your home for at least 2-3 years after refinancing to see meaningful savings.

Closing Costs to Consider

Canadian mortgage refinancing typically involves these costs:

• Prepayment Penalties: If breaking your current mortgage term early, you may face penalties (3 months interest or Interest Rate Differential)
• Legal Fees: $800-$1,500 for lawyer costs
• Appraisal Fee: $300-$500 for home appraisal
• Discharge Fee: $200-$300 to discharge existing mortgage
• Title Insurance: $200-$400
• Administration Fees: Various lender fees

Other Reasons to Refinance

Consolidate Debt: You can refinance to access home equity and consolidate high-interest debt like credit cards. This converts expensive debt into a lower-rate mortgage payment.

Home Renovations: Access equity for home improvements that increase property value.

Change Mortgage Type: Switch from variable to fixed rate (or vice versa) based on market conditions and your risk tolerance.

Remove Mortgage Insurance: If your home has appreciated and you now have 20%+ equity, refinancing can eliminate CMHC insurance premiums.

Mortgage Refinancing in Canada

In Canada, you can refinance up to 80% of your home's appraised value (minus any outstanding mortgage balance). This is known as the 80% loan-to-value (LTV) rule. For example, if your home is worth $500,000, you can refinance up to $400,000.