Mortgage Renewal & Break-Even Calculator
Two decisions, one page. Whether to break a term early and eat the penalty, and whether to sign the renewal your lender posted you or move. Both compare what you pay in plus what you still owe, so a lower payment can't disguise a worse mortgage.
1. Break early, or ride out the term?
You have time left on a rate you no longer like. Breaking costs a penalty; staying costs the rate. This compares the two over a common horizon.
2. Your renewal letter, or a better rate elsewhere?
Your term is ending and no penalty applies. The only question is whether the rate in the envelope is competitive.
The renewal letter is an opening bid, not an offer
Roughly two thirds of Canadian homeowners sign the renewal their existing lender posts them without speaking to anyone else. Lenders know this. The rate in that envelope is reliably worse than the rate the same lender advertises to new customers, because retaining a borrower who does not shop costs nothing and winning a new one costs a discount.
You have more leverage at renewal than at any other moment in the mortgage. The balance is known, the payment history is clean, and every competing lender wants the file. Start about four months before the maturity date — most lenders will hold a rate that long — and take a competing quote back to your current lender before you decide. Panel 2 above prices the difference over the whole term rather than per month, which is where a rate gap that looks trivial stops looking trivial.
How the comparison is done
Comparing two mortgages at different rates is harder than it looks, because a lower rate usually also means a different payment, and a lower payment leaves you owing more later. Comparing payments alone flatters the cheap-looking option; comparing interest alone ignores what you still owe at the end.
Both panels therefore use a single honest measure over a fixed horizon:
total cost = everything you pay in + whatever you still owe at the end
Two paths over the same number of months, each with its own payment, each ending with its own balance. The path with the lower total cost is genuinely cheaper, and the difference is real money rather than an artefact of the payment schedule. Interest is compounded semi-annually throughout, as the federal Interest Act requires for Canadian fixed-rate mortgages — the same convention used by the Canadian mortgage calculator, and not the American monthly convention most online tools apply.
Panel 1 needs one assumption it cannot know: the rate you would get when your current term actually ends. That is the “expected rate at your renewal” field, and the result is sensitive to it. Move it up and down by half a point to see how much of the answer rests on that guess.
When breaking early pays for itself
Breaking mid-term is worth it when the interest saved over the remaining months exceeds the penalty plus costs. Three things drive it:
- The size of the rate gap. A full point on a $500,000 balance is roughly $5,000 a year in interest. Half a point rarely justifies a five-figure penalty.
- How long is left. Savings accrue monthly; the penalty is paid once. With four years left a penalty amortizes comfortably. With eight months it almost never does.
- Which penalty convention your lender uses. This is the one most people never check, and it can swing the penalty by five figures on an identical mortgage. The penalty calculator runs both conventions side by side.
The break-even figure above is the month at which the cheaper rate has fully repaid the penalty. If it lands before your current term would have ended, breaking is clearly ahead. If it lands after, you are betting that rates at your renewal date will be worse than the rate you can lock today — a real bet, not a certainty.
Blend and extend, and porting
Breaking is not the only route out of a rate you dislike. Blend and extend mixes your existing rate with a current one over a new, longer term, so no penalty is triggered because the mortgage is never formally broken. The blended rate sits between the two, weighted by the balance and the time remaining, and lenders are not obliged to offer you their best pricing on the new portion — compare the blend against breaking cleanly and re-borrowing, which panel 1 prices.
Porting carries your existing rate and term to a new property, which matters if you are moving rather than refinancing. Most lenders allow it within a window of 30 to 120 days between selling and buying, and most will blend if you need to borrow more. Ask for the port rules in writing before you list.
If you signed in 2020 or 2021
A large cohort locked five-year fixed rates near 2% and is now renewing into something considerably higher. The payment increase is genuine and often substantial — on a $480,000 balance, moving from 1.99% to 4.19% adds several hundred dollars a month. Some things that help:
- Extend the amortization. On renewal you can usually reset the amortization, which lowers the payment materially. It costs more interest over the long run, and it is far better than defaulting. Try it in the amortization field above.
- Shop the switch properly. The gap between a renewal letter and a competitive rate is frequently larger than anything else you can control right now.
- Check where you stand on the ratios first. If the new payment pushes your GDS or TDS ratios uncomfortably high, the affordability and stress test calculator will show it before a lender does.
One piece of good news: your penalty for breaking such a mortgage is almost certainly small, because the interest rate differential only exists when rates have fallen since you signed. For a 2021 mortgage they have risen, so only the three-months-interest floor applies.
Switching lenders is not the same as refinancing
A straight switch moves the same balance on the same amortization to a new lender. A refinance changes the amount borrowed or the amortization. The distinction matters because switches are cheaper, faster, and treated differently by the rules.
In November 2024 OSFI confirmed that borrowers moving an insured mortgage to a new lender at renewal, keeping the same amortization and balance, do not have to requalify at the minimum qualifying rate. Uninsured switches are treated differently and practice varies between lenders. This is an area where the rules have moved more than once, so confirm your own situation with the lender rather than relying on any calculator, including this one.
What this calculator cannot tell you
It compares rates and costs. It does not know your prepayment privileges, whether your existing mortgage is collateral-charged (which can add legal costs to a switch), whether a cash-back clawback applies, or what rates will actually be when your term ends. The expected-renewal-rate field is a guess by construction — treat any result that depends heavily on it as a range rather than an answer, and get a written payout statement from your lender before committing to anything.