Refinance calculator
See whether breaking your mortgage pays off once the penalty is counted, and when you break even.
Your current mortgage
Your current payment: a month
Debts to consolidate
Anything you'd roll into the new mortgage: car loans, credit cards, lines of credit.
| Debt | Balance | Rate | Payment / mo |
|---|
Cost to refinance
Fixed-rate penalties can be higher than 3 months' interest (the IRD).
Your new mortgage
Extra equity to take out for a renovation, an investment or a down payment on a rental.
Month by month
Your running savings after the penalty and fees. Below zero, the refinance hasn't paid for itself yet. Above zero, you're ahead.
Your options side by side
| Today | Refinance: more cash flow | Refinance: same payment |
|---|
Refinancing, in plain English
Refinancing means replacing your mortgage, usually to get a better rate, roll other debts into it, or pull out equity. Doing it before your term is up has a cost: a prepayment penalty, which on a fixed mortgage can run into the thousands.
So the real question isn't just whether the new rate is lower. It's whether the savings beat the penalty, how soon, and whether this is the moment to restructure so your debt starts working for you.
Renewing soon? Renewal is the one time you can switch lenders or restructure with no penalty at all. Start looking a few months before your date, not when the letter shows up.
Is it a fit?
Refinancing pays off in some situations and costs you in others. Here's the quick version.
Worth a look
- You carry credit card, car or line-of-credit debt at higher rates
- Your renewal is coming up in the next six months
- Rates have dropped meaningfully since you signed
- You want to use equity for a rental or to start investing
Probably not yet
- The penalty outweighs what you'd save
- You'd likely run the consolidated debts back up
- You'd need to borrow more than 80% of your home's value
- You plan to sell the home soon
Refinance questions
Penalties and fees vary by lender. These are the questions Mitch gets most.
How is the penalty calculated?
On a variable-rate mortgage it's usually three months' interest. On a fixed rate it's usually the greater of three months' interest or the interest rate differential, which depends on how your lender calculates it. Mitch will get your actual number from your lender before you decide.
How much can I borrow?
A refinance is generally limited to 80% of your home's value, including your current mortgage and anything you're consolidating.
Should I just wait for renewal?
Sometimes. If your renewal is close, waiting avoids the penalty entirely. If you're carrying expensive debt or rates have dropped a lot, breaking early can still come out ahead. The calculator above shows the break-even point.
What does it cost besides the penalty?
Usually legal fees, an appraisal and a discharge fee from your current lender. Some lenders cover part of these. Mitch will include them in your numbers.
Can I restructure while I refinance?
Yes, and it's the cheapest time to do it. If you're breaking the mortgage anyway, setting it up as a readvanceable mortgage opens the door to strategies like the Smith Manoeuvre or Rental Cash Damming.
Refinancing is also the moment to restructure.
If you're breaking the mortgage anyway, it's the cheapest time to set it up so it works harder for you. Mitch will run both versions with your lender's real penalty.