Find out if breaking your current mortgage will save you money after penalties.
Monthly Savings
+$176
Recommendation
You would break even in 33 months and save $4,874 over 5 years. Worth discussing with Ajay.
This calculator compares your current mortgage payment to what you would pay after refinancing at a new rate and amortization. It factors in the penalty for breaking your existing mortgage to determine whether the switch makes financial sense.
The 3-month interest penalty is straightforward: your current monthly interest cost multiplied by three. The IRD penalty is more complex, based on the rate difference over your remaining term. Most lenders charge the greater of the two for fixed-rate mortgages.
The break-even point tells you how many months of savings it takes to recover the penalty. If you plan to stay in the home past the break-even point, refinancing is likely beneficial. The 5-year net savings figure gives you the total financial impact over a standard term.
Keep in mind that additional costs such as legal fees ($500-$1,500), appraisal fees ($300-$500), and discharge fees may apply. Contact Ajay for an exact penalty quote from your lender and a complete cost-benefit analysis.
The 3-month interest penalty is calculated as three months of interest on your remaining mortgage balance at your current rate. This is the typical penalty for variable-rate mortgages and is sometimes used for fixed-rate mortgages as well, depending on the lender.
IRD is calculated based on the difference between your current mortgage rate and the rate the lender can charge today for a term matching your remaining term. This penalty is typically higher than the 3-month interest penalty and applies to most fixed-rate mortgages. The exact calculation varies by lender.
Refinancing is generally worth considering if the monthly savings will recover the penalty cost within 2-3 years and you plan to stay in the home for at least that long. A lower break-even period means stronger financial benefit. Always factor in legal fees and appraisal costs as well.
You can avoid penalties by waiting until your renewal date to switch lenders or renegotiate your rate. Some mortgages also allow blend-and-extend options where your lender blends your current rate with a new rate for a new term, reducing or eliminating penalties.
Ajay can get your exact penalty from your lender and find the best refinance rate for you.