Refinance
Calculator Canada 2026

Consider refinancing when you can lower your rate by at least 0.50% to 0.75%, you have enough time remaining on your amortization to recoup costs, and the penalty for breaking your current term is manageable. Refinancing is most common at the end of a 5-year term when no penalty applies, but mid-term refinancing can still make sense if the savings significantly exceed the prepayment penalty.

For variable-rate mortgages, the penalty is typically 3 months of interest. For fixed-rate mortgages, the penalty is the greater of 3 months interest or the Interest Rate Differential (IRD). The IRD calculation varies by lender but is generally based on the difference between your current rate and the rate the lender can charge for the remaining term. IRD penalties can be substantial, sometimes exceeding $10,000 to $20,000.

The IRD is a penalty calculation used by Canadian lenders when you break a fixed-rate mortgage early. It equals the difference between your contract rate and the current posted rate for the remaining term, multiplied by your balance and remaining months. For example, if your rate is 5.5%, the current 3-year posted rate is 4.5%, your balance is $400,000, and you have 3 years left, the IRD penalty would be approximately $12,000. Each lender calculates IRD slightly differently.

If your refinance results in a loan-to-value ratio above 80%, CMHC insurance is required. However, unlike a new purchase where you can get insurance with as little as 5% equity, refinances are capped at 80% LTV. This means you cannot refinance for more than 80% of your home value. If your original mortgage had CMHC insurance, you may be able to port it to the new mortgage in some cases.

Typical Canadian refinancing costs range from $1,000 to $3,000 and include: legal fees ($500-$1,500), title insurance ($200-$400), appraisal fee ($300-$500), discharge fee from your current lender ($200-$350), and registration fees ($50-$100). Unlike the US, Canadian refinance costs are relatively modest. However, add any prepayment penalty to get the true total cost of switching.

Yes, debt consolidation is one of the most common reasons Canadians refinance. You can refinance up to 80% of your home value and use the equity to pay off higher-interest debts like credit cards (19.99%), lines of credit (7-9%), or car loans (6-8%). Converting $50,000 in credit card debt at 19.99% to your mortgage at 5.5% saves roughly $7,250 per year in interest. However, be disciplined to avoid re-accumulating high-interest debt.

Switching lenders often gets you a better rate, but involves more costs (appraisal, legal fees, discharge fees). Staying with your current lender may mean a simpler process with lower costs. At renewal (end of term), there is no penalty to switch, so always shop around. Mid-term, compare the total cost of switching (penalty + closing costs) against the savings. Get quotes from your current lender, a mortgage broker, and at least one online lender.

A blend-and-extend lets you blend your current mortgage rate with a new rate and extend your term without breaking your mortgage. This avoids prepayment penalties but typically results in a rate higher than the best available new rate. It makes sense when the IRD penalty is very high and you want to take advantage of lower rates without paying a large penalty. Not all lenders offer this option.

When you refinance in Canada, you can choose a new amortization period up to 25 years (or 30 years with some lenders for conventional mortgages). Extending your amortization lowers monthly payments but increases total interest paid. Shortening it does the opposite. If you are 10 years into a 25-year mortgage and refinance with a new 25-year amortization, you are now paying for 35 total years, which significantly increases lifetime interest cost.

No, mortgage interest on your principal residence is not tax-deductible in Canada (unlike in the United States). However, interest on a mortgage used for an investment property or to invest in income-producing assets may be deductible. This is sometimes called the Smith Manoeuvre, a strategy where you use a readvanceable mortgage to convert non-deductible mortgage debt into tax-deductible investment debt. Consult a tax professional before attempting this.