Mortgage Refinance Calculator 2024
Reasons to Refinance Your Mortgage
- Lock in a lower interest rate before your mortgage renewal date
- Borrow money for debt consolidation, home improvements, and other major expenses
- Change mortgage types, such as between a closed or open mortgage, or between fixed and variable rates
I would like to refinance to...
Your Mortgage Information
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Mortgage Refinance Penalty Estimate
If you are unaware of any discount, you can skip this step.
| Total Cost: | $54,000 |
|---|---|
| Principal | $28,471 |
| Interest | $25,529 |
| Total Cost: | $63,677 |
|---|---|
| Principal | $19,299 |
| Interest | $44,378 |
What is a mortgage refinance?
A mortgage refinance also allows you to unlock the equity that you have built up in your home, which is the value of your home minus the remaining balance on your mortgage. Mortgage refinancing is when you replace your old mortgage with a new mortgage that has a bigger balance, and can also include changes to the term length and the mortgage interest rate. The difference between your current balance and the new mortgage is the amount that you will be able to borrow as a lump-sum cash payment.
Mortgage Refinance, Renewal and Switch Comparison
| Refinance | Renew | Switch | |
|---|---|---|---|
| Change Mortgage Amount | Yes | No | No |
| Change Mortgage Amortization | Yes | No | No |
| Mortgage Stress Test | Yes | No | Yes |
| Fees | Appraisal, Discharge, Assignment, Registration, and Legal Fees | None | Appraisal, Discharge, Assignment, Registration, and Legal Fees |
| Paperwork | High | Low | Medium |
Posted Rates of Banks and Lenders
| Term | Posted Rate |
|---|
Refinance, renew, or switch?
Every mortgage has a limited term in Canada. In August 2023, 17% of new mortgages were fixed-rate mortgages with a term length of 5 years or more. On the other hand, 51% of the mortgages were fixed-rate mortgages with a term length of 3 years to less than 5 years. When your mortgage term expires, you will either have to pay off your mortgage in full or take one of the following actions: renew, refinance, or switch mortgages. You can renew your mortgage with the same lender with minimal paperwork, switch to a new lender offering better mortgage terms or rates, or refinance your mortgage to access your home equity.
Mortgage Renewal
Of all mortgage renewals and refinancing in Canada in 2020, 90.4% of them were at the same lender. Renewing at the same lender is quick and easy, and it may not require additional documentation depending on the lender. 96.7% of same lender renewals were approved in 2020, compared to only 61.3% of mortgages for new home purchases.
Mortgage Balance and Prepayments
While you can change the mortgage interest rate, payment frequency, and term length when negotiating your renewal, your mortgage principal balance will remain the same. At the time of renewal, you may pay off as much of the principal balance as you wish.
Open mortgages allow you to prepay before the end of the term without incurring prepayment charges; however, they come with higher mortgage interest rates. Closed mortgages offer a lower interest rate, but they can come with prepayment charges depending on the amount of prepayment. Some lenders offer prepayment privileges that will allow you to pay up to a certain portion of the principal, with that amount directly paying down the principal. Some lenders may limit prepayments to a single lump-sum payment per year. If your mortgage lender is federally regulated, payment privileges must be clearly displayed in your mortgage agreement contract.
Annual prepayment limits do not roll over. If you do not use your limit in one year, you cannot apply it to the next year. Mortgage prepayment allowances depend on your lender. RBC, TD, CIBC, and BMO all allow principal prepayments of any amount at the time of renewal without prepayment penalties.
How to make sure to get the best mortgage renewal
You will receive a mortgage statement before renewal that contains information such as the principal remaining, new offered interest rate, and term length if your lender is federally regulated. Be aware that your mortgage renewal can be automatic, even if you do not take action on your end. The terms listed on your mortgage statement will apply, which may not be the best current mortgage rate in Canada. You can always negotiate for a better interest rate than the one stated in your mortgage statement before your mortgage is renewed especially if you do shop around and show them a lower rate from a competitor
Switching Mortgage Lenders at Renewal
If you no longer want to stay with the same mortgage lender at renewal, you can always switch to another mortgage lender. This can be due to a variety of reasons, such as a better mortgage rate offered by another lender, or mortgage terms that are more suitable for you (e.g. less mortgage penalty). There are costs to changing mortgage lenders that may be charged, such as appraisal and registration fees. Your new lender may cover these transfer costs.
Switching to a new lender also requires you to pass a mortgage stress test if the lender is federally regulated. A mortgage stress test is not required if you renew your mortgage at the same lender. Provincially regulated credit unions, quasi-regulated B Lenders, and private lenders are not required to conduct a mortgage stress test. You may be denied at a federally regulated lender if you fail the stress test when transferring over, such as if your income has dropped.
Stress Test Requirements for Mortgages
| Mortgage Stress Test Required | |||
|---|---|---|---|
| Refinance | Switch | Renew | |
| A Lenders | Yes | Yes | No |
| B and Private Lenders | No | No | No |
What is the cost to refinance a mortgage?
If you refinance your mortgage at the renewal there would be no charge but if you refinance your mortgage before your term is up, you may be charged a mortgage prepayment penalty. You will be charged mortgage registration and appraisal fees. You may be charged legal fees if you require a real estate lawyer, and switching to a new lender may result in a mortgage discharge fee.
Mortgage Refinance Guide
Should I refinance my mortgage?
Unlike simply renewing a mortgage, refinancing allows you to unlock up to 80% of the equity that you have built up in your home, which is your home market value minus your mortgage amount that is left. 81.4% of refinances from the same lender were approved in 2020.
Refinancing your mortgage allows you to put your home equity to work towards debt consolidation, home renovations, or even for investing. Compared to a home equity line of credit (HELOC), refinancing allows you to borrow at your mortgage interest rate, which can be significantly lower than HELOC rates.
Visit our mortgage refinance guide to learn more about the advantages of refinancing, the cost of refinancing, and whether it makes sense to refinance your mortgage.
Why should I not refinance my mortgage?
While a refinance can be a great way to unlock equity in your home, it can come with an expensive prepayment penalty. If you have a fixed rate mortgage and have a few years left on your mortgage contract, it can be very expensive to refinance your home. In these cases, it can be better to use a HELOC or a second mortgage to draw from your home equity without interfering with your original mortgage.
How to decide whether or not to refinance your mortgage
To see if refinancing is worth it for you, compare what it would cost to borrow through other sources, such as a regular loan or a HELOC, versus the cost of refinancing. Refinancing can take from two to four weeks and requires information such as your assets and proof of income, along with a home appraisal.
Increasing your mortgage balance means that you will have to pay back more in the future. However, it may be worthwhile to refinance if it means you can consolidate debt that has higher interest rates, such as credit card debt.
Can you refinance your mortgage to reconsolidate debt?
Yes, you can refinance to consolidate debt. Refinancing means that you can receive most of the equity value of your home as a lump-sum amount, which also means that you will be charged interest in the full amount as well, even if you do not use the entire cash amount. This may be worth it if you need to make a large lump-sum payment for an expense, such as paying off high-interest credit cards, but it might not be beneficial if you have no plans for the cash. A home equity line of credit allows you to withdraw only what you need to use, and in turn, interest is only charged on the amount that you actually use. You can check the potential savings using a loan calculator and determine if it's worth it for you.
Interest Rate Comparison
| Interest Rates for New Loans | |
|---|---|
| Residential Mortgages (Insured) | 6.31% |
| Residential Mortgages (Uninsured) | 6.42% |
| Personal Loans | 10.04% |
| Auto Loans | 8.19% |
| Secured Personal Lines of Credit | 7.07% |
| Credit Cards | 20.52%* |
*Interest rate for outstanding balances
Source: Bank of Canada as of November 2023
When is it smart to refinance your mortgage?
You do not have to increase your mortgage principal balance when refinancing. Refinancing gives you an opportunity to take advantage of current mortgage interest rates if they are lower than your mortgage rate. It can be advantageous to break a mortgage early and pay prepayment charges if it means you can roll into a much lower interest rate. If your credit score and financial situation have improved, your mortgage interest rate may also be lower. You may also opt to change to a longer amortization period, which will allow for lower mortgage monthly payments.
Does mortgage refinance require appraisal?
Most mortgage lenders will require an appraisal when refinancing your mortgage. Home appraisals determine the value of your home, which may have changed significantly since your last valuation. Most lenders will want an up-to-date value before lending you more money against your home.
Can you refinance a mortgage with bad credit?
Refinancing a mortgage at traditional lenders such as banks can be difficult with bad credit due to their stricter lending criteria. B-Lenders and private mortgage lenders are an option for those with bad credit, with some private lenders having no minimum credit score requirement at all.
How many times can you refinance a mortgage?
There is no limit to the number of times that you can refinance your mortgage, as long as you have not reached the maximum cap of 80% of your home’s value. Mortgage refinancing does come with fees and charges each time you refinance.