Mortgage Refinance Calculator in Ontario Canada
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Reviewed by Calculator Editorial Team
Refinancing your mortgage in Ontario can help you save money on interest payments, lower your monthly payments, or access equity. Our mortgage refinance calculator helps you estimate your potential savings and understand the costs involved in refinancing your home loan.
How the Mortgage Refinance Calculator Works
Refinancing your mortgage involves replacing your existing home loan with a new one, typically at a lower interest rate. This can help you save money over the life of your loan. Our calculator estimates your potential savings based on your current mortgage terms and the new loan terms you're considering.
Key Inputs
The calculator requires several key inputs to provide an accurate estimate:
- Current mortgage balance: The remaining amount on your existing mortgage
- Current interest rate: The annual percentage rate (APR) of your existing mortgage
- Current loan term: The remaining term of your existing mortgage in years
- New interest rate: The APR you're considering for your refinance
- New loan term: The term you're considering for your refinance in years
- Closing costs: Estimated fees associated with refinancing (typically 2-5% of the mortgage amount)
Calculation Process
The calculator uses the following steps to estimate your savings:
- Calculate the remaining monthly payment on your current mortgage
- Calculate the monthly payment for your new mortgage using the new terms
- Calculate the total interest paid over the remaining term of your current mortgage
- Calculate the total interest that would be paid with the new mortgage terms
- Estimate the total savings by comparing the two scenarios
Important Note
This calculator provides an estimate only. Actual savings may vary based on your specific circumstances and the terms offered by your lender. Always consult with a mortgage professional before making any decisions.
Formula Used
The calculator uses the following formulas to estimate mortgage payments and savings:
Monthly Payment Formula
M = P [ i(1 + i)^n ] / [ (1 + i)^n - 1 ]
Where:
- M = monthly payment
- P = principal loan amount
- i = monthly interest rate (annual rate divided by 12)
- n = number of payments (loan term in years multiplied by 12)
Total Interest Paid Formula
Total Interest = (Monthly Payment × n) - P
Savings Estimate Formula
Savings = (Current Total Interest - New Total Interest) - Closing Costs
Worked Example
Let's look at an example to see how the calculator works. Suppose you have a $300,000 mortgage with the following terms:
| Current Mortgage | New Mortgage |
|---|---|
| Balance: $300,000 | Balance: $300,000 |
| Interest Rate: 5.0% | Interest Rate: 3.5% |
| Term: 5 years remaining | Term: 5 years |
| Closing Costs: $0 (for comparison) | Closing Costs: $3,000 |
Current Mortgage Details
- Monthly Payment: $6,437.04
- Total Interest Paid: $32,186.00
New Mortgage Details
- Monthly Payment: $6,151.36
- Total Interest Paid: $27,070.00
Savings Estimate
- Interest Savings: $5,116.00
- Closing Costs: $3,000.00
- Net Savings: $2,116.00
In this example, refinancing would save you approximately $2,116 over the remaining 5 years of your mortgage, after accounting for closing costs.
Key Considerations
Before refinancing your mortgage, consider these important factors:
1. Interest Rate Changes
The most significant factor in refinancing is the interest rate. Even a small decrease in your interest rate can lead to substantial savings over the life of your loan.
2. Closing Costs
Refinancing typically involves closing costs of 2-5% of the mortgage amount. These costs can offset some of your savings, so it's important to factor them into your decision.
3. Loan Terms
Consider whether you want to shorten or extend your loan term. A shorter term may save you money on interest but could increase your monthly payments.
4. Credit Score
Your credit score plays a significant role in determining the interest rate you can qualify for. Make sure you have a strong credit score before applying for a refinance.
5. Market Conditions
Interest rates and mortgage terms can change frequently. Stay informed about current market conditions before making a decision.
Professional Advice
Refinancing a mortgage is a significant financial decision. Always consult with a mortgage professional to understand the best options for your specific situation.
Frequently Asked Questions
- How often should I consider refinancing my mortgage?
- There's no set schedule for refinancing. You should consider it when interest rates are significantly lower than your current rate, when you want to change your loan term, or when you need to access equity from your home.
- What are the typical closing costs for refinancing?
- Closing costs for refinancing typically range from 2% to 5% of the mortgage amount. Common fees include appraisal fees, legal fees, and mortgage insurance premiums.
- Can I refinance if I have a variable-rate mortgage?
- Yes, you can refinance a variable-rate mortgage, but you should carefully compare the terms of your current mortgage with the new offer to ensure you're making a financially sound decision.
- How long does the refinancing process take?
- The refinancing process typically takes 30 to 45 days, but this can vary depending on your lender, the complexity of your situation, and any delays in obtaining necessary documentation.
- What happens if I can't qualify for a refinance?
- If you can't qualify for a refinance, you may need to wait for better market conditions or improve your financial situation before attempting to refinance again.