When should you refinance: at renewal or mid-term?
The cheapest time to refinance is at renewal: there's no prepayment penalty, and if you only want a better rate, a straight switch to another lender skips the stress test. Refinancing mid-term pays when the interest you save before your term would have ended is more than the penalty and fees, or when you need the cash now and a HELOC or blend-and-increase would cost more. Variable-rate borrowers, whose penalty is three months' interest, have the most freedom.
At renewal
No penalty, and your lender must send a renewal statement at least 21 days before the term ends (FCAC). Want cash or a longer amortization? Refinance then. Just want the best rate? Switch, and since November 21, 2024, an uninsured straight switch doesn't have to pass the qualifying rate (OSFI).
Mid-term: the test
Breaking pays only if the interest saved before your term would have ended beats the penalty and fees. For our example ($420,000 at 5.39%, big-bank IRD), the new rate would need to be about 4.27% for breaking to pay off over five years; the cheapest route at 4.58% is blend and extend. The calculator gives your trigger rate.
Signals it's worth a look
- You're on a variable rate and want certainty: the penalty is three months' interest.
- Rates have dropped well below yours and you have under two years left (a small IRD).
- You're carrying card or loan debt at 21.35%-type rates: see debt consolidation.
- You need money for a renovation or a suite; an insured refinance up to 90% exists for adding units.
Frequently asked questions
Is it worth refinancing for a 1% lower rate?
It depends on the penalty and the time left. On a variable mortgage (three months' interest) usually yes; on a big-bank fixed mortgage with years left, the IRD can absorb most of the saving. Run the numbers.
How early can I renew my mortgage?
Many lenders let you renew without a penalty in the last months of your term; ask yours how early. Earlier than that is an early renewal, often as a blend-and-extend.
Primary sources
- Financial Consumer Agency of Canada — Renewing your mortgage (21-day renewal statement; switching costs) (effective October 15, 2025). Checked .
- Financial Consumer Agency of Canada — Breaking your mortgage contract (fees, cash-back clawback, blend-and-extend) (effective October 15, 2025). Checked .
- OSFI — Uninsured straight switches exempt from the minimum qualifying rate (effective November 21, 2024). Checked .
- 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 .