Should I break my mortgage to switch lenders?
Break a mortgage to switch lenders only when the prepayment penalty plus discharge, legal, and appraisal fees, plus any cash-back clawback, divided by your monthly savings, is fewer months than you have left. If that payback is longer than the months remaining, wait for renewal or ask for a blend-and-extend. A straight switch at renewal has no prepayment penalty, and an uninsured straight switch has not required the stress test since November 21, 2024.
Break the mortgage to switch lenders only when the payback is shorter than the time you have left.
Break-even months = (prepayment penalty + discharge fee + legal fees + appraisal + any cash-back clawback) ÷ monthly savings.
Compare that result with the months remaining before renewal.
- If break-even months are fewer than the months left, the switch can pay for itself before renewal.
- If break-even months are longer, do not break. Wait for renewal, or ask the current lender for a blend-and-extend, which blends the existing rate with today's rate and usually avoids the penalty.
A straight switch at renewal has no prepayment penalty. Since November 21, 2024, an uninsured straight switch — same loan amount, same or shorter remaining amortization, no cash-out — is exempt from the prescribed stress test. A refinance that increases the amount, lengthens the amortization, or takes cash out is still tested at the greater of the contract rate plus 2 percentage points or 5.25%.
Price the penalty with the penalty calculator. Add discharge, legal, appraisal, and any cash-back clawback with the switch cost calculator. The full walkthrough is the refinance break-even guide.
Key Points
Break-even months equal the penalty plus discharge, legal, appraisal, and any cash-back clawback, divided by the monthly saving.
If that payback is longer than the months left, wait for renewal or ask for a blend-and-extend.
An uninsured straight switch at renewal has not required the prescribed stress test since November 21, 2024.
Primary sources
Primary sources cited by the Ratellow Research Team. Editorial standards · Correction policy
Related Questions
How do GDS and TDS ratios affect my refinancing options?
GDS (Gross Debt Service) and TDS (Total Debt Service) ratios are critical affordability indicators that financial institutions use to determine your eligibility for refinancing.
What is the Loan-to-Value (LTV) ratio, and how does it impact my ability to refinance?
The Loan-to-Value (LTV) ratio plays a critical role in the refinancing process.
How does OSFI's Guideline B-20 affect refinancing?
OSFI's Guideline B-20 establishes the benchmark for residential mortgage underwriting practices that federally regulated financial institutions (FRFIs) must adhere to.
What is a 'straight switch,' and how does it impact refinancing at renewal?
A "straight switch" refers to the process of transferring an existing uninsured mortgage to a new institution when it's up for renewal, without increasing the remaining amortization period or the loan amount.