Mortgage · Canada
Refinance analysis.
Compare your current mortgage with a new one. See monthly savings, break-even point, and lifetime interest difference.
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Refinance analysis
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When refinancing makes sense
Refinancing is usually worthwhile when the new rate is at least 0.5%–1% below your current rate, you plan to stay in the home past the break-even date, and you have equity above 20% to avoid CMHC re-insurance.
TNAADO Inc. · Toronto
Refinancing trades a penalty now against interest later
Breaking a mortgage mid-term for a lower rate is worth doing only if the interest saved over the remaining term exceeds the cost of getting out. That cost is the prepayment charge plus discharge, legal and appraisal fees, and registration if you change lenders. On a fixed-rate mortgage the charge is the greater of three months’ interest or the interest rate differential, and IRD formulas vary enough between lenders that the only reliable number is the one your lender puts in writing.
The mistake people make. Comparing rates and ignoring the amortization reset. Refinancing back to a fresh 25 years lowers the payment and can raise total interest even at a lower rate. The other trap is refinancing to clear unsecured debt: it converts credit-card debt into debt secured by the house, which lowers the rate and raises the stakes considerably.
Disclaimer
Estimates for educational purposes only. Speak to a mortgage broker about prepayment penalties before breaking your existing term.