Should you break your mortgage early to renew?
Breaking your mortgage early to renew at a lower rate pays off when your interest savings are larger than the penalty to break. The calculator above does that comparison for you: it estimates your prepayment penalty, your new monthly payment, your break-even point (how many months it takes to recover the penalty), and your net savings over the rest of your term. If you break even well before your term ends, an early renewal is usually worth it.
This is sometimes called an "early renewal," an "early break," or a "blend and extend." Whatever the label, the math is the same, you're giving up the rest of a higher-rate term to lock in a lower rate today, and the only question that matters is whether the savings beat the cost of leaving early.
How the penalty works in Canada
On a variable-rate mortgage, the penalty is almost always three months' interest. On a fixed-rate mortgage, you pay the greater of three months' interest or the interest rate differential (IRD). The IRD compares your current rate to the rate the lender can charge now for the time left in your term, so the bigger the rate gap and the more time left, the larger the penalty. Big banks (RBC, TD, Scotiabank, BMO, CIBC, National Bank) calculate the IRD from their posted rates, which makes their penalties much larger than monoline lenders and credit unions that use your actual contract rate. You can estimate your exact penalty with our Canadian mortgage penalty calculator.
When breaking early tends to pay off
- Rates have dropped meaningfully since you signed
- You have enough time left in your term to clear the break-even and keep saving
- Your lender uses the cheaper contract-rate penalty method, or your penalty is just three months' interest
- You're already consolidating debt or accessing equity, so you're refinancing anyway, see our refinance & debt consolidation calculator
The estimates here aren't an approval or an offer. We confirm your exact penalty with your lender, shop 50+ lenders for the best rate, and structure the move, sometimes with the new lender covering part of the penalty, so it actually works in your favour.