Renewal is the moment your mortgage reprices — and for the large wave of Canadian mortgages taken or renewed at pandemic-era lows, the 2025–2026 renewals are repricing sharply upward. This hub explains payment shock in real dollars, when breaking a mortgage to refinance actually pays, and the two penalty formulas lenders use — with the calculators to run your own numbers before the renewal letter turns into a signature.
A renewal continues your existing mortgage with the same lender at a new rate and term when your current term ends. There is no penalty, no re-approval in most cases, and usually no paperwork beyond the renewal agreement — which is exactly why lenders count on you signing it without shopping. A refinance replaces your mortgage with a new one: a different lender, a different amount, or an early exit from your current term. Refinancing mid-term means breaking your contract, and breaking it triggers a prepayment penalty. Everything below turns on that distinction: renewal is free but easy to overpay for; refinance can save real money but charges you at the door.
A large share of Canada's outstanding mortgages were originated or last renewed in 2020–2021, when five-year fixed rates sat near historic lows. Those terms mature through 2025 and 2026 into a rate environment roughly two percentage points higher, and because the balance has only had five years of paydown, the payment jump lands on nearly the full amount. Concrete example, using this site's payment math: a $400,000 balance with 20 years of amortization left costs $2,022 a month at 2.00%. Renew that same balance at 4.49% and the payment becomes $2,520 a month — about $498 more every month, or roughly $6,000 a year, for the same house and the same debt. Extending amortization back out softens the monthly hit but adds years of interest; the payment calculator shows both versions side by side, and the prepayment calculator shows what even a small extra payment does to the new, higher interest bill.
One genuine piece of relief for switchers: rules that took effect in late 2024 removed the stress-test requirement for many borrowers who switch lenders at renewal for a straight renewal of the same amount and amortization, which makes it easier to take a better rate elsewhere instead of accepting your current lender's first offer. Whether it applies to your mortgage depends on your insurer and lender — confirm before assuming, and never let a renewal deadline pressure you into skipping the comparison.
Breaking your mortgage to refinance? New payment, monthly savings, penalty estimate, and the break-even month.
Open calculator →Re-run your current balance at any renewal rate and amortization — Canadian semi-annual compounding, every frequency.
Open calculator →Extra payments against the new rate: interest saved, time cut off, and your new mortgage-free date.
Open calculator →Switching lenders can mean qualifying again — check your stress-test pass/fail before you apply.
Open calculator →A refinance is worth doing when the monthly savings repay the cost of breaking your old mortgage before you move, renew again, or break the new one. The formula is deliberately simple: break-even months = (penalty + fees) ÷ monthly savings. This site's refinance calculator runs a verified example: breaking a $400,000 mortgage to move from 5.5% down to 4.0% cuts the payment from $2,738 to $2,104 — saving $633 a month — and the break-even on the estimated penalty lands at 11.8 months. Stay in the new mortgage longer than that and the refinance is ahead; leave sooner and it was an expensive rate change. Run your own balance, both rates, and your lender's actual penalty quote through the same math: small rate gaps on small balances routinely produce break-evens longer than the new term itself, which is the calculator telling you to stay put.
On a variable-rate mortgage, the prepayment penalty is usually three months' interest on the balance you are breaking — simple to estimate and rarely catastrophic. On a fixed-rate mortgage with most major lenders, the penalty is the greater of three months' interest or the Interest Rate Differential (IRD): your contract rate minus the lender's current rate for the time remaining, applied to your balance for the rest of the term. IRD penalties on big-bank posted-rate mortgages can reach tens of thousands of dollars, and the exact calculation varies by lender — some use discounted rates, some use posted rates, and the difference is enormous. Every penalty figure on this site is an estimate using the three-months'-interest method unless labelled otherwise; treat it as a planning number, and get your lender's exact penalty in writing before you sign anything. That single phone call is the highest-value step in any refinance.
Four to six months before your term ends: pull your current balance and amortization, run your payment at two or three plausible renewal rates, and check what a prepayment today does to the balance you will renew. When offers arrive, compare at least your lender's renewal offer against one outside quote, run any refinance through the break-even test, and confirm the penalty in writing if you are leaving mid-term. If you are switching lenders, the affordability calculator shows the ceiling a new lender would apply to your income, and every tool mentioned here also lives on the all mortgage calculators hub. Then — and only then — sign. Renewal is the largest recurring financial decision most households make, and it rewards exactly the same thing every other page on this site rewards: doing the math before the deadline does it for you.
Educational only — nothing here is mortgage advice, and penalty and qualification rules vary by lender and insurer. A licensed mortgage broker or agent can quote your exact penalty and renewal options.
Every calculator in one place, organized by the job you are trying to do — buying, paying down, renewing, or closing.
Read the guide →The full journey in order: save with the FHSA and RRSP Home Buyers' Plan, qualify under the stress test, then buy with Ontario rebates.
Read the guide →Ontario and GTA math: Toronto's double land transfer tax, 8% PST on CMHC premiums, Ontario closing costs, and rent vs buy in the GTA.
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