Mortgage Renewal & Refinance Calculator — Canadian Rate Comparison

What Does This Renewal & Refinance Calculator Show?

The renewal and refinance calculator compares two mortgage payment scenarios: your current rate and your proposed new rate. It outputs the monthly payment difference, the new total interest cost, and — for refinancing — the number of months before your interest savings exceed the prepayment penalty (the break-even point). For renewal scenarios, it assumes the penalty is zero; for refinancing, you can enter the estimated penalty to see whether breaking early is financially justified over your intended horizon.

Renewal Scenario — New Rate, Same Lender or Switch

For a renewal scenario, enter your current outstanding balance, remaining amortization, your expiring rate, and the new rate you have been offered. The calculator outputs your new monthly payment, the dollar change from your current payment, and the total interest cost over the new term. Renewal at the end of your term is always penalty-free — whether you stay with your current lender or switch lenders for a better rate. A straight switch to a new lender no longer requires the federal stress test, but you must still qualify at that lender's contract rate; staying with your current lender requires no requalification.

Refinance Scenario — Breaking Early vs Waiting

For a refinancing scenario — breaking your closed mortgage before the term ends — the calculator shows the monthly interest saving and divides the penalty by that saving to produce the break-even timeline: the number of months until cumulative savings exceed the penalty paid. A remortgage (early refinance) is financially worthwhile only if you plan to keep the mortgage at the new rate for longer than the break-even period. If your break-even is longer than your intended remaining time in the home, waiting until natural renewal is typically the better financial decision.

Mortgage Renewal in Canada — What Changes at Term End?

When a Canadian mortgage term ends — typically every 1 to 5 years — the borrower must renew at whatever rate is currently available. If rates have risen since the original mortgage, payments increase. On a $400,000 balance with 20 years remaining, moving from a 3.00% rate to a 5.00% rate increases the monthly payment from approximately $2,215 to $2,629 — an increase of approximately $414 per month or approximately $4,966 per year. There is no prepayment penalty when renewing at the natural end of a term.

How Your Rate Change Affects Your Monthly Payment

On a $400,000 mortgage balance with 20 years remaining, a renewal rate increase from 3.00% to 5.00% raises the monthly payment by approximately $414 — or approximately $4,966 more per year. The table below shows monthly payments at common renewal rates, all benchmarked against the 3.00% baseline, for a $400,000 balance with 20 years remaining.

Assumes $400,000 balance with 20 years remaining amortization. Canadian semi-annual compounding applied. All figures verified.

Switching Lenders at Renewal — No Penalty Required

A Canadian lender is required to send a mortgage renewal notice at least 21 days before the term expires — borrowers who receive this notice should begin rate shopping immediately, as the best rates often require advance negotiation. Switching lenders at renewal is penalty-free because your term obligation has been fulfilled. Borrowers who do not shop around typically accept whatever rate their current lender offers — surveys suggest this costs Canadian homeowners $3,000–$8,000 over a typical 5-year term. Since late 2024, the federal stress test is no longer the main barrier to switching on a straight switch — qualifying at the new lender's contract rate is. Lender requirements at renewal can differ from your original qualification — see our Canadian mortgage qualification guide for what counts when switching lenders.

Mortgage Refinancing — Is Breaking Early Worth It?

Refinancing a closed mortgage before the term ends triggers a prepayment penalty — typically the higher of three months' interest or the Interest Rate Differential (IRD). The break-even point is the number of months until the cumulative interest saving from the lower rate equals the penalty paid. On a $400,000 balance at 6.00% with 2 years remaining, refinancing to 4.50% saves approximately $327 per month. If the IRD penalty is $12,000, the break-even point is approximately 37 months — just over 3 years after refinancing.

Prepayment Penalty vs. Monthly Interest Saving

Variable-rate mortgage holders who refinance always pay the simpler 3-month interest penalty; fixed-rate holders pay the higher of 3-month interest or the Interest Rate Differential, which can be substantially larger when rates have declined. The first step in evaluating a refinance is determining which penalty formula applies. For variable-rate mortgages: balance × (annual rate ÷ 12) × 3. For fixed-rate mortgages, the IRD is: (contract rate − lender's current posted rate for the remaining term) × outstanding balance × remaining years. See the prepayment penalty calculator to estimate your specific penalty before deciding.

Break-Even Timeline — When Does Refinancing Pay Off?

The break-even point divides the penalty by the monthly interest saving. The table below shows break-even timelines across three refinancing scenarios on a $400,000 mortgage at 6.00% with 2 years remaining — the break-even is near-identical (~36–37 months) across all rows because the IRD and the monthly saving scale proportionally with the rate differential.

IRD estimate assumes posted rate equals new offered rate. Assumes 20-year remaining amortization for payment calculations. Actual penalties vary by lender — confirm with your lender before making any refinancing decision.

How Much Will My Mortgage Payment Go Up at Renewal?

The size of a renewal payment increase depends on three factors: how much higher the new rate is, the remaining balance, and the remaining amortization. A 2-percentage-point rate increase on a $400,000 balance with 20 years remaining raises the monthly payment by approximately $414 to $449, depending on the starting rate — for example, 3%→5% adds $414/month, while 5%→7% adds $449/month. Borrowers who face significant payment shock can request a re-amortization extension. Switching lenders at renewal may also produce a better rate offer; on a straight switch, the federal stress test no longer applies (you must still meet the new lender's contract-rate qualification).

Rate Increase Scenarios — 1%, 2%, 3% Higher

For Canadian homeowners who locked in rates at 2%–3% during 2020–2022, renewal at current rates represents a significant payment increase. A $400,000 balance with 20 years remaining at 3% costs $2,215/month; at 5% it costs $2,629/month; at 7% it costs $3,077/month. The payment shock is proportional to both the rate increase and the remaining balance — borrowers with larger balances and longer remaining amortizations face the largest absolute increases. Use the scenario comparison tool above to model your specific renewal options.

Extending Your Amortization to Reduce Payment Shock

Re-amortization — extending the amortization period at renewal — reduces the monthly payment but increases total lifetime interest cost; it is a tool for managing payment shock, not for reducing the total cost of the mortgage. For example, extending from 20 years remaining to 25 years remaining at a 5% rate on a $400,000 balance reduces the monthly payment from $2,629 to $2,326 — a reduction of $303/month — but adds 5 years of interest payments. Use re-amortization as a last resort after exploring rate options and lump sum prepayments. Contact your lender before the renewal date — FCAC mortgage renewal guide outlines your rights and options.

Stress Test at Renewal — Do You Need to Requalify?

Renewal stress test rules changed in late 2024: for straight lender switches (loan amount unchanged, amortization unchanged), OSFI removed the stress test requirement for uninsured mortgages on Nov 21, 2024, and Finance Canada removed it for insured/insurable mortgages on Dec 16, 2024. Borrowers switching lenders at renewal must still qualify at the new lender's contract rate and meet that lender's internal criteria, but no longer need to pass the contract-rate-plus-2%-or-5.25% qualifying rate test. If the borrower increases the loan amount (beyond ~$3,000 in fees) or extends the amortization, full requalification including the stress test applies.

Renewing With Your Current Lender — No Stress Test

Canadian mortgage holders who renew with their existing lender remain exempt from the mortgage stress test. With your current lender, you can take any rate offered — fixed or variable, any term length — without requalifying. This provides significant flexibility for borrowers whose income or credit situation has changed since the original mortgage was underwritten.

Switching Lenders at Renewal — Straight Switch Rules

If you switch lenders at renewal on a straight switch, the federal stress test no longer applies under OSFI's Nov 21, 2024 guidance and Finance Canada's Dec 16, 2024 rule for insured mortgages. The new lender must still qualify you at its contract rate and apply its own underwriting standards — but not at contract rate + 2% or 5.25%. Non-straight switches (higher balance or longer amortization) trigger full requalification including the stress test. Use the mortgage stress test calculator if your renewal involves a larger loan or amortization change. Confirm current rules before making any switching decision.

Sources

1. Financial Consumer Agency of Canada (FCAC) — Renewing your mortgage
2. Financial Consumer Agency of Canada (FCAC) — FCAC guide to breaking a mortgage contract
3. Office of the Superintendent of Financial Institutions (OSFI) — Residential mortgage underwriting practices and procedures
4. Financial Consumer Agency of Canada (FCAC) — FCAC mortgage stress test guidance
5. Bank of Canada — Staff Analytical Note 2025-21