Is it worth switching from my bank's mortgage for 0.2%? (Canada)

In Canada, switching lenders at renewal for a rate 0.2 percentage points lower is often worth it on a larger balance and often not on a small one. On an illustrative $500,000 balance, the lower rate saves about $1,000 of interest in the first year and about $4,700 over a five-year term, before switching costs. Subtract what the switch costs you after the new lender's contribution, and remember your own bank may match.

What "0.2%" means here

A rate that is "0.2% lower" usually means 0.20 percentage points lower, not 0.2% of your rate. The rate gap is the difference between the two rates, whatever those rates are. The saving in dollars depends on your balance and on how long the gap lasts. How long the gap lasts is the length of your term, the contract period.

A worked example of the switch saving

Illustrative, not a quote. The balance and costs below are examples, not offers.

You owe $500,000, have 25 years left to pay it off (your amortization), and are choosing a five-year term. Another lender offers a rate 0.20 percentage points lower than your renewal letter.

The simple rule: each year, the saving is about the balance × 0.002. Because you pay the balance down every month, the saving shrinks a little each year. Using approximate average balances for each year (the exact figures depend on your rate and payment):

1. Year 1: about $494,000 × 0.002 = about $990
2. Year 2: about $482,000 × 0.002 = about $960
3. Year 3: about $469,000 × 0.002 = about $940
4. Year 4: about $456,000 × 0.002 = about $910
5. Year 5: about $443,000 × 0.002 = about $890

Total over the term: about $4,700 of interest, before costs. With a higher or lower rate, the balance falls at a slightly different pace. The total still stays roughly in the range of $4,600 to $4,800. The saving is about $1,000 in the first year and a little less each year after.

The saving shows up as a slightly lower payment or, if you keep your payment the same, as a faster pay-down.

Now subtract the switching costs

Switching at maturity has no prepayment penalty, but there can be other costs. The Financial Consumer Agency of Canada lists set-up fees with the new lender and an appraisal fee. The agency also says you can ask the new lender to cover some or all of your switching costs (source: Financial Consumer Agency of Canada, checked October 2026).

Your current lender may charge a discharge fee, and the new mortgage has to be registered, which can mean legal costs. Many lenders cover part of these costs on a straight switch.

Say the switch costs you an illustrative $1,500 after the new lender's contribution. The saving passes $1,500 during the second year (about $990 in year one plus about $960 in year two is about $1,950). Over five years you would be about $3,200 ahead ($4,700 − $1,500). If the new lender covers everything, you keep the full amount.

When the answer changes

• A smaller balance. On an illustrative $200,000, the same gap is about $1,900 over five years ($4,700 × 200,000 ÷ 500,000). After $1,500 of costs, about $400 is left. Some borrowers decide a saving that small is not worth a new application.
• A shorter term. With a three-year term on the $500,000 example, the saving is about $2,900 (years one to three above). The costs then take a larger share.
• The rest of the offer. A lower rate can come with a harsher penalty method, smaller prepayment privileges, or a mortgage you cannot move to a new home. If your plans change, those terms can cost more than 0.2 points saves.

Your bank may match

Before you move, many borrowers take the written offer to their current lender. The Financial Consumer Agency of Canada says you can negotiate and "may qualify for a discounted interest rate that is lower than the rate quoted in your renewal letter" (checked October 2026). If your bank matches, you save the same amount without switching costs or a new application elsewhere. A match from your bank is a good result, not a lost one.

What to do next

Put your own balance, term and costs into the renewal vs switch tool. The tool's results are estimates only, not an offer or advice. Or bring your renewal letter through Can your bank do better?. We check your renewal letter against the lenders we work with, and if staying is the better deal, we say so.