Mortgage Refinance Calculator

A mortgage refinance is the process of breaking your current mortgage term for an entirely new mortgage. You may be looking to refinance if you want to increase your mortgage amount, extend your amortization, get a better interest rate, consolidate debts, or add or remove a title holder from your home (covenant change). You can refinance either through your existing lender or by switching to a new lender. 

It’s important to consider the cost of breaking your current mortgage and compare this to any cost savings. A refinance should leave you in a better financial position. If you are refinancing to lower your mortgage payments, you will want to consider the extra interest-carrying costs of extending your amortization. 

When you refinance, our mortgage calculator can help you see the benefits or drawbacks of extending your amortization to lower payments or access home equity. If you’re considering refinancing your mortgage, take advantage of our mortgage refinance calculator to run scenarios and weigh your options. 

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Key Takeaways

• Mortgage refinancing is the process of breaking your current mortgage term for an entirely new mortgage.
• A mortgage refinance calculator can help you see the benefits or drawbacks of extending your amortization to lower payments or access home equity.
• Lowering monthly mortgage payments can be achieved by extending the amortization or refinancing for a lower interest rate.

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How To Use A Mortgage Refinance Calculator

Our refinance calculator makes it easy to run scenarios and calculate future mortgage payments should you choose to refinance your mortgage. By selecting the purpose of the refinance (lower mortgage payment, access equity, or change amortization), you can quickly get an overview of the total interest you will pay over the term. This way, you can compare your current mortgage term and see if a refinance makes sense for your situation. 

Current Property Value: Enter the current assessed value of your home here. If you are unsure, you can use CREA’s National Price Map to help you find the average property values in your area. 

Remaining Balance: Enter the balance you have remaining on your mortgage. 

Province: Select your province in the drop-down menu.

Remaining Amortization: Enter how many years remain on your mortgage here. To confirm, you can check your mortgage by clicking on it in your online banking. Alternatively, you can look at your latest mortgage balance statement and reduce it by the number of months since the statement was issued. 

Payment Frequency: Select the frequency you wish to make mortgage payments in the drop-down. 

Note: Accelerated payment frequencies can save you time and interest on your mortgage. 

Mortgage Rate: You can choose to use the pre-selected rates by using the dropdown to adjust the term length (5-year terms being the most popular). 

Note: If you already have a rate, you can enter it in the custom field. 

Why Use A Refinance Calculator?

Use our calculator tool to consider if a refinance is the right move for you. Leverage the refinance calculator to weigh your options and see if there are benefits to lowering your monthly payments by extending your amortization or accessing the equity in your home. 

Lower Your Monthly Mortgage Payment

If you’re finding your finances stretched thin each month, or you’d like to start putting more savings aside, refinancing your mortgage to lower your monthly mortgage payments and free up some additional cashflow may make sense. Refinancing to extend your amortization by even 5 years can improve your monthly cash flow and free up funds. 

Note: Keep in mind that extending your amortization without any reduction in interest rates will cost significantly more in interest-carrying costs over the life of the mortgage. 

If interest rates have decreased since your recent mortgage term began, a refinance could help you lower borrowing costs on your mortgage and allow for a lower mortgage payment. In refinancing to a lower interest rate, you should realize cost savings on your mortgage payments without the need to increase your amortization.

In this scenario, assess the total interest-carrying costs for the new mortgage plus any penalties/fees associated with discharging your current mortgage. You will also need to consider the costs of legal and appraisal fees for the new mortgage before determining any cost savings on your refinance to a lower interest rate. 

Access Equity On Your Mortgage

You can access up to 80% of the equity you have built up in your property since it was purchased. Equity is the portion of the mortgage you have already paid off, plus any additional unrealized growth in increases to your property’s value. 

For example, if you have a property valued at $500,000 and a remaining mortgage balance of $250,000, you can access up to $150,000. 

Once you refinance, you can set up the amount you want to have paid out as either a mortgage (if you need the equity immediately) or a line of credit (if you need the equity for use in the future). 

You can use the equity in your home to consolidate your various interest debts into a single lower-interest payment. Consider consolidating debts with higher interest-carrying costs, such as credit cards, personal and car loans, and lines of credit and move the balances over to your mortgage to lower the interest-carrying costs of these higher-interest credit facilities. 

You can also use the equity in your home to set up a line of credit that can help fund anything from home renovations to investment properties or even a much-needed vacation. However, lines of credit should be limited to utilizing no more than a third to half of their limit over a long period to avoid affecting your credit score negatively.

Accelerate Your Mortgage Payment 

When you are refinancing and need to decide on a 25 or 30-year amortization, the refinancing mortgage rates would be the same in both scenarios. If extending your amortization to 25 or 30 years to lower your mortgage payments, consider changing your mortgage payments to the accelerated payment options available. You’ll benefit by having much lower mortgage payments while paying your mortgage off sooner.

Switching to an accelerated payment schedule will save years off the life of your mortgage. Accelerated payments mean you make more payments throughout the year compared to regular payment frequencies. Accelerating your payments is a useful addition to help offset some of the interest-carrying costs of extending your amortization to lower payments. 

Should I Refinance, Renew Or Switch My Mortgage?

The choice to refinance, renew, or switch your mortgage will depend on where you are in your mortgage term and if there are significant benefits like the potential for cost savings or better terms. 

Renew: When you renew your mortgage, this means that you have not yet fully paid off the mortgage balance, and your current term is coming to an end. Your principal amount of the mortgage remains the same, but you would renegotiate for a new term and interest rate. Renewals allow you to explore what other lenders offer, which you can use as leverage to negotiate better terms with your current lender. Otherwise, consider switching to a new lender.  

Switch: Switching means taking your mortgage from your current lender to another and keeping the principal balance the same. This is generally to secure a better interest rate or more favourable terms. You can switch lenders at any time during your mortgage term, but keep in mind that switching before your term ends could come with significant penalties, which may negate any savings you would realize if you’re switching for a better rate. 

Refinance: Refinancing is beneficial to lower mortgage payments or access the equity in your home. When you are refinancing, you are obtaining a new mortgage with a new interest rate, terms and conditions. A refinance involves taking out a new mortgage loan and paying out your existing mortgage. If you choose to refinance you will lose your mortgage default insurance if you have it.

Of all the available options, switching your mortgage is the only option that will allow you to capitalize up to $3,000 and add it to the principal balance of your mortgage. You can use this amount to finance any fees associated with switching to a new lender.  

What Are Prepayment Penalties?

If you have a fixed-rate mortgage and are considering refinancing, you will need to figure out what penalties you will pay. Lenders use either the greater of 3 months of interest or an interest rate differential (IRD) to calculate the penalty for breaking your mortgage before the term ends. If you have a variable-rate mortgage most lenders will calculate your penalty as 3 months of interest. 

Note: It is recommended you inquire with your lender to confirm the correct prepayment penalty if you are currently carrying a fixed mortgage rate. IRD formulas can sometimes use a discount from a posted rate which varies from their historical records.

Types Of Homebuyers In Canada

Many different types of buyers exist, from first-time buyers, those purchasing a new home, to renewers and refinancers. Regardless of what type of homebuyer you are, a mortgage calculator is a great tool to help you calculate and compare your available options and find ways to save money. 

Purchasing a New Home: 

If you’re looking to purchase a new home, the first step is to figure out how much home you can afford. If you plan to sell your current home, you can leverage the equity from the sale and use it towards your downpayment on the new home. 

Using our mortgage affordability calculator makes it easy to quickly calculate how much you can afford to purchase a new home. To get started, you will need to know your annual income and the annual income of any co-applicants, how much you have for a down payment, and the amount of your debt payments (credit cards, car loans, student loans, line of credit, and any other liabilities). 

First-time Homebuyer: 

As a first-time homebuyer, the first thing you will need to do is determine how much you have ready as a down payment. You can then run scenarios to see how much you need for a mortgage and whether you need to pay mortgage default insurance. 

Using our mortgage down payment calculator can help you quickly and easily run scenarios based on a percentage or dollar amount to determine the total mortgage amount you will need to purchase a home. 

To get started, enter the asking price of the home and select the province where the home is located. You can then easily enter either percentages or dollar amounts to test up to 3 down payment scenarios. Use these scenarios to see the impact on the mortgage default insurance you must pay and provincial taxes, if applicable. This will help you budget for the total upfront expense of purchasing a home. 

Renewer:

 If you’re coming to the end of your mortgage term, you are likely shopping around for the best rates and terms to renew your mortgage. Calculate your future mortgage payments using our mortgage renewal calculator, which can help you quickly and easily estimate and run scenarios. 

Refinancing Your Mortgage: 

If you’re looking to refinance your mortgage, it’s likely to take out equity in your home, lower your interest-carrying costs, or consolidate debts. Using our mortgage refinance calculator above can help you run scenarios to see what impact they have on your mortgage should you choose to refinance.

To get started, select what you are looking to do: either lower mortgage payments, access equity, or change your amortization, then enter the current property value and the balance remaining on your mortgage.   

What Type Of Mortgage Should I Choose?

Choosing the type of mortgage comes down to your financial situation and personal risk. When choosing the type of mortgage, you should also be aware of current market conditions. 

Fixed Mortgage: Fixed mortgages mean the rate you choose remains unchanged over the mortgage term. If rates should go up or down over the term, there will be no changes to your mortgage. With fixed rates, you will renegotiate a new rate at the end of each term during your amortization period.  

• Monthly interest and principal payments remain the same throughout the term, regardless of any changes to rates (increases or decreases). 
• Fixed-rate mortgage rates are linked to the bond market. When these rates go up, fixed-rate mortgages tend to do the same. 

Variable Mortgage: Variable mortgages mean your rate could change over the mortgage term. Rates can either increase or decrease based on the lender’s prime rate. Variable-rate mortgages can have either fixed or adjustable payments. 

Variable rates with fixed payments:

• If interest rates increase, more of your mortgage payment will go toward the interest portion.
• If interest rates decrease, more of your mortgage payment will go toward the principal portion. 

Variable rates with adjustable payments:

• When the lender’s prime rate changes (increases or decreases), the interest portion of your mortgage payment will adjust (increase or decrease) along with it. 

Note: Fixed payment variable mortgages are at risk of over-amortization (also known as negative amortization), whereas adjustable payment variable mortgages are not impacted in the same way as the payment is adjusted with changes in your lender’s prime rate.

Mortgage Term Length: The mortgage term is the length of time you have committed to the terms and conditions of the loan. Typically, in Canada, the most popular term length is 5 years though you can get terms as short as 6 months or as long as 10 years. It’s important to note that interest rates will vary based on the term length. 

You may see mortgage term lengths of

• 6-month
• 1-year (both variable and fixed)
• 2-year
• 3-year (both variable and fixed)
• 4-year
• 5-year (both variable and fixed)
• 7-year
• 10-year

Frequently Asked Questions