Should you refinance?
Refinancing only pays if the savings recover the costs before you move or renew. This finds your break-even point.
A lower rate is tempting, but refinancing has costs. The question is simple: how many months until the monthly saving repays those costs?
Break-even calculator
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Beyond the math
The calculator handles the numbers, but consider timing too. If you plan to sell or your term renews before the break-even month, refinancing now may not be worth it. If you will hold well past break-even, the savings compound in your favour.
Frequently asked questions
When does refinancing make sense?
When the monthly saving from a lower rate recovers the refinancing costs within a period shorter than how long you will keep the mortgage. A common rule of thumb is a rate drop of at least 0.5 to 1 percent.
What are the costs of refinancing?
Possible discharge or prepayment penalties, appraisal, legal and registration fees, and sometimes a new lender's fees. In Canada, breaking a fixed mortgage early can carry a large penalty.
What is the break-even point?
The number of months it takes for your monthly savings to repay the upfront refinancing costs. Past that point, refinancing is pure saving.
Can I refinance to access equity?
Yes. A refinance can let you borrow against home equity, but it increases your loan and total interest. Weigh the purpose against the long-term cost.
Does refinancing reset my amortization?
It can. Extending the amortization lowers the payment but raises total interest. Keeping or shortening the amortization preserves the interest savings.