What will my payment be at renewal — and what would switching save me? Compare your current lender’s renewal offer with a switch offer, see the interest over the term and the balance left at the end of the term, and estimate the penalty if you break your mortgage early.
Calculate your renewal
How renewal payments work
Canadian mortgages use a nominal rate compounded semi-annually, not monthly. The monthly rate is i = (1 + r/2)^(2/12) − 1, and the payment is balance × i / (1 − (1+i)^−n), where n is the number of monthly payments left in the amortization. The same formula is used for your current payment and for each renewal offer, so the comparison is apples to apples.
Total interest over the renewal term is the payments you make during the term minus the principal you pay down in that term. The balance at the end of the term is what you would still owe when that term ends and the mortgage comes up for renewal again.
The prepayment penalty is the greater of three months’ interest (balance × contract rate ÷ 4) and the interest rate differential (IRD). For a standard lender, IRD = (contract rate − today’s rate for a term matching the time left) × balance × years remaining, floored at zero. For a big bank using posted rates, IRD = (posted rate when you signed − posted rate today for the remaining term) × balance × years remaining, floored at zero. If the switch rate is above your contract rate, the IRD is zero and the penalty is three months’ interest.
Estimates only. Switching at maturity has no penalty. Penalty figures are estimates — lenders use their own posted rates and day counts, so confirm the exact penalty with your lender before you break a term.
Frequently asked questions
Should I stay with my current lender or switch at renewal?
Compare the total interest over the term, not just the monthly payment. A lower rate usually means less interest and a lower balance at the end of the term, but check for switch fees, legal costs, and whether the new lender covers them.
Is there a penalty for switching at renewal?
No. Switching at maturity — when your term ends — has no prepayment penalty. A penalty only applies if you break your mortgage before the term ends.
Why is the IRD sometimes higher than three months’ interest?
The IRD reflects the interest your lender loses when rates have fallen since you signed. When rates have dropped a lot, or a lot of time is left in the term, the IRD can be much larger than three months’ interest, and the lender charges the greater of the two.
Does a lower renewal rate always save money?
Almost always on interest, but look at the whole picture: the payment change, the balance at the end of the term, any switch costs, and — if you break early — the penalty. This calculator shows the interest saved and, when you enable the penalty section, the net benefit after the penalty.
Related tools
See the full payoff picture with the Mortgage Amortization Calculator, and work out a new mortgage payment with the Canadian Mortgage Calculator.