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RefinanceCalculator.caBreak, blend or stay: the math, honestlyAsk Mitey
The math

Refinance break-even: how to work it out properly

A refinance breaks even when the interest you save at the lower rate adds up to the penalty plus fees. Measure it on the same balance and amortization, month by month. Dividing the costs by the drop in your payment is a shortcut that overstates the saving, especially when the new mortgage has a longer amortization. On $420,000 going from 5.39% to 4.58% with $12,000 of costs, the honest answer is 45 months; the shortcut says 34.

Facts checked How we check facts
  1. Keep the balance and amortization the same on both sides, so only the rate differs.
  2. Each month, compare what you've paid plus what you still owe. The difference is interest saved.
  3. The break-even month is when interest saved reaches the penalty plus fees.

Our break, blend or stay calculator does this for four routes at once and also counts what happens when your current term would have renewed.

Why the shortcut misleads

"Costs ÷ monthly payment saving" has two problems. Part of every payment is principal, which you get to keep either way, so a smaller payment isn't all saving. And if the new mortgage resets to a longer amortization, the payment falls even if the rate doesn't. In our example the shortcut says 34 months; the interest-based answer is 45.

Compare with your term

Break-even only matters against the time left on your term. If you have 30 months left and break even at month 34, you'd have been better off renewing at the new rate in 30 months. The break-even calculator flags this.

When you take cash out

With cash out there is no "stay" to break even against, because staying doesn't raise the money. Compare the ways of getting it instead: refinancing, blend-and-increase, or a HELOC behind your current mortgage. See cash-out refinance vs HELOC.

Frequently asked questions

What is the break-even point when refinancing a mortgage?

The month when the cumulative interest saved by the new, lower rate equals what you paid to switch: the penalty plus legal, appraisal and discharge fees.

Should I refinance if the break-even is after my term ends?

Usually not. At the end of your term you can renew or switch at the new rates with no penalty, so breaking early only pays if you recover the costs before then.

Primary sources

  1. Financial Consumer Agency of Canada — Reduce mortgage prepayment penalties (3 months' interest or the IRD; posted-rate method; prepayment privileges; porting) (effective October 15, 2025). Checked .
  2. Financial Consumer Agency of Canada — Breaking your mortgage contract (fees, cash-back clawback, blend-and-extend) (effective October 15, 2025). Checked .
  3. Justice Laws — Interest Act, s. 6 (mortgage rates stated yearly or half-yearly, not in advance). Checked .
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